When Financial Markets Appear to Obey the Laws of Physics: Structural Constraints, SIRRIPA, and Equity Performance

This article examines when financial markets appear to obey laws analogous to those of physics and argues that this appearance arises from structural constraints rather than behavioral patterns. Within the framework of structural finance, and specifically the PPP–SIRRIPA methodology, prices are treated as boundary conditions that jointly fix time, cash-flow expectations, and a common numéraire. Under these conditions, the market-implied shareholder return (SIRRIPA) emerges as a structural quantity analogous to a potential gradient in a constrained dynamical system. The paper shows that higher ex-ante SIRRIPA values do not predict absolute returns but impose stronger convergence constraints on price trajectories, leading on average to superior relative equity performance, conditional on the validation of expected earnings. Market dynamics are therefore interpreted as constrained convergence processes, providing a practical explanation for the systematic rank-ordering of stocks and the emergence of persistent differences in relative equity performance.