Related papers: Are Financial Crashes Predictable?
Financial markets are systems with the complex behavior, that can be hardly analyzed by means of linear methods. Recurrence Quantification Analysis (RQA) is a nonlinear methodology, which is able to work with the nonstationary and short…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
This chapter first presents a rather personal view of some different aspects of predictability, going in crescendo from simple linear systems to high-dimensional nonlinear systems with stochastic forcing, which exhibit emergent properties…
In the prediction of oscillating time series, the interest is in the turning points of successive oscillations rather than the samples themselves. For this purpose a scheme has been proposed; the state space reconstruction is limited to the…
Abrupt shifts in ecosystems, brains, markets, and climate are often diagnosed as signs of approaching a tipping point, i.e. a critical bifurcation where stability is lost. Here we reveal a broader and more deceptive mechanism:…
Evidence is offered for log-periodic (in time) fluctuations in the S&P 500 stock index during the three years prior to the October 27, 1997 "correction". These fluctuations were expected on the basis of a discretely scale invariant rupture…
Using in a simple way the theory of non linear dynamical systems, we show that increasing climatic instabilities may be a qualitative warning sign for the occurrence of a nearby bifurcation, yielding a discontinuous and sudden climate…
A hypothesis that the financial log-periodicity, cascading self-similarity through various time scales, carries signatures of a law is pursued. It is shown that the most significant historical financial events can be classified amazingly…
By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding of investors and traders and (iii) the mathematical and statistical physics of bifurcations and phase transitions, the…
In this paper, we present the possibility of using the Ising like models to explain by Statistical Physics means the connection between the financial discontinuities (herd behavior, bubbles, crashes) and "critical points" in physical of…
For oscillating time series, the prediction is often focused on the turning points. In order to predict the turning point magnitudes and times it is proposed to form the state space reconstruction only from the turning points and modify the…
We present an analysis of the time behavior of the $S\&P500$ (Standard and Poors) New York stock exchange index before and after the October 1987 market crash and identify precursory patterns as well as aftershock signatures and…
The study efforts to explore and extend the crisis predictability by synthetically reviewing and comparing a full mixture of early warning models into two constitutions: crisis identifications and predictive models. Given empirical results…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
We report a phenomenon that physical perturbations sometimes can benefit the certainty of a free-fall motion with chaotic modes, albeit, as commonly believed, they can ruin it. We statistically compare those factors that may lead to…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
Renowned method of log-periodic power law(LPPL) is one of the few ways that a financial market crash could be predicted. Alongside with LPPL, this paper propose a novel method of stock market crash using white box model derived from simple…
We apply the Hurst exponent idea for investigation of DJIA index time-series data. The behavior of the local Hurst exponent prior to drastic changes in financial series signal is analyzed. The optimal length of the time-window over which…
We investigate whether fractal markets hypothesis and its focus on liquidity and invest- ment horizons give reasonable predictions about dynamics of the financial markets during the turbulences such as the Global Financial Crisis of late…
The discrepancy between realized volatility and the market's view of volatility has been known to predict individual equity options at the monthly horizon. It is not clear how this predictability depends on a forecast's ability to predict…