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Forecasting the Global Financial Crisis in the Years 2009-2010: Ex-post Analysis

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  • Dean Fantazzini

    ()
    (Moscow School of Economics - Moscow State University)

Abstract

The ex-ante forecast of the SP500 index discussed in Fantazzini (2010a), covering the time sample 14/04/2009 - 09/10/2010, and originally submitted to the Economics Bulletin on the 15/05/2009 is analyzed. It is found that the realized values of the SP500 index trailed the forecasted values quite well, moving inside the forecast confidence bands for over a year. Interestingly, it is also found that the confidence bands worked very good as resistance levels, while the forecasted values as support levels. Moreover, an important turning point in April 2010 was also correctly forecasted. However, in July-August 2010, the SP500 started to diverge upwards, and after the speech by the FED Chairman at Jackson Hole (Wyo., USA) on the 27/08/2010, the stock market index never returned inside the forecast confidence bands. Additional evidence is then provided to show that the anti-bubble started in October 2007 ended almost three years later in August 2010, similarly to the first anti-bubble on the SP500, which started in August 2000 and ended in August 2003.

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I4-P295.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 4 ()
Pages: 3259-3267

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Handle: RePEc:ebl:ecbull:eb-11-00391

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Keywords: Log-periodic models; LPPL; Crash; Anti-Bubble; Long-term Forecasting; Out-of-sample Forecasting; GARCH; Ex-post Analysis; SP500; FED.;

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  1. Petr Geraskin & Dean Fantazzini, 2013. "Everything you always wanted to know about log-periodic power laws for bubble modeling but were afraid to ask," The European Journal of Finance, Taylor & Francis Journals, vol. 19(5), pages 366-391, May.
  2. Zhou, Wei-Xing & Sornette, Didier, 2006. "Is there a real-estate bubble in the US?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 361(1), pages 297-308.
  3. Jiang, Zhi-Qiang & Zhou, Wei-Xing & Sornette, Didier & Woodard, Ryan & Bastiaensen, Ken & Cauwels, Peter, 2010. "Bubble diagnosis and prediction of the 2005-2007 and 2008-2009 Chinese stock market bubbles," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 149-162, June.
  4. Sornette, Didier & Zhou, Wei-Xing, 2006. "Predictability of large future changes in major financial indices," International Journal of Forecasting, Elsevier, vol. 22(1), pages 153-168.
  5. Dean Fantazzini, 2010. "Modelling and forecasting the global financial crisis: Initial findings using heterosckedastic log-periodic models," Economics Bulletin, AccessEcon, vol. 30(3), pages 1833-1841.
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