Related papers: Are Financial Crashes Predictable?
Motivated by the hypothesis that financial crashes are macroscopic examples of critical phenomena associated with a discrete scaling symmetry, we reconsider the evidence of log-periodic precursors to financial crashes and test the…
We propose that large stock market crashes are analogous to critical points studied in statistical physics with log-periodic correction to scaling. We extend our previous renormalization group model of stock market prices prior to and after…
We argue that the word ``critical'' in the title is not purely literary. Based on our and other previous work on nonlinear complex dynamical systems, we summarize present evidence, on the Oct. 1929, Oct. 1987, Oct. 1987 Hong-Kong, Aug. 1998…
A brief historical perspective is first given concerning financial crashes, - from the 17th till the 20th century. In modern times, it seems that log periodic oscillations are found before crashes in several financial indices. The same is…
We propose a picture of stock market crashes as critical points in a hierachical system with discrete scaling. The critical exponent is then complex, leading to log-periodic fluctuations in stock market indexes. We present ``experimental''…
We respond to Sornette and Johansen's criticisms of our findings regarding log-periodic precursors to financial crashes. Included in this paper are discussions of the Sornette-Johansen theoretical paradigm, traditional methods of…
Log-periodic oscillations have been used to predict price trends and crashes on financial markets. So far two types of log-periodic oscillations have been associated with the real markets. The first type are oscillations which accompany a…
We clarify the status of log-periodicity associated with speculative bubbles preceding financial crashes. In particular, we address Feigenbaum's [2001] criticism and show how it can be rebuked. Feigenbaum's main result is as follows: ``the…
Comment on "Are financial crashes predictable?", L. Laloux, M. Potters, R. Cont, J.P Aguilar and J.-P. Bouchaud, Europhys. Lett. 45, 1-5 (1999)
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical…
Several authors have noticed the signature of log-periodic oscillations prior to large stock market crashes [cond-mat/9509033, cond-mat/9510036, Vandewalle et al 1998]. Unfortunately good fits of the corresponding equation to stock market…
This review is a partial synthesis of the book ``Why stock market crash'' (Princeton University Press, January 2003), which presents a general theory of financial crashes and of stock market instabilities that his co-workers and the author…
We present a synthesis of all the available empirical evidence in the light of recent theoretical developments for the existence of characteristic log-periodic signatures of growing bubbles in a variety of markets including 8 unrelated…
The occurrence of aftershocks following a major financial crash manifests the critical dynamical response of financial markets. Aftershocks put additional stress on markets, with conceivable dramatic consequences. Such a phenomenon has been…
This is a reply to Johansen's comment on `Are Financial Crashes Predictable?', by L. Laloux, M. Potters, R. Cont, J.P. Aguilar, J.P. Bouchaud, Europhys. Lett. 45, p. 1 (1999).
Applicability of the concept of financial log-periodicity is discussed and encouragingly verified for various phases of the world stock markets development in the period 2000-2010. In particular, a speculative forecasting scenario designed…
We study a rational expectation model of bubbles and crashes. The model has two components : (1) our key assumption is that a crash may be caused by local self-reinforcing imitation between noise traders. If the tendency for noise traders…
A challenging problem in physics concerns the possibility of forecasting rare but extreme phenomena such as large earthquakes, financial market crashes, and material rupture. A promising line of research involves the early detection of…
A phenomenon of the financial log-periodicity is discussed and the characteristics that amplify its predictive potential are elaborated. The principal one is self-similarity that obeys across all the time scales. Furthermore the same…
The self-similar analysis of time series, suggested earlier by the authors, is applied to the description of market crises. The main attention is payed to the October 1929, 1987 and 1997 stock market crises, which can be successfully…