IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v474y2017icp162-171.html
   My bibliography  Save this article

Analysis of the Lehman Brothers collapse and the Flash Crash event by applying wavelets methodologies

Author

Listed:
  • Beccar-Varela, Maria P.
  • Mariani, Maria C.
  • Tweneboah, Osei K.
  • Florescu, Ionut

Abstract

In this study, we apply a wavelet methodology initially developed for geophysical data to financial data. Specifically, the method distinguishes between natural tectonic earthquakes and man made explosions. We exemplify using time series data from two financial events: the Lehman Brothers collapse and the Flash Crash event. We conclude that the Lehman Brothers collapse behaves like a natural earthquake while the Flash Crash event behaves like a human made explosion. This study may imply that the Lehman Brothers type events may be predicted, while sudden Flash Crash type events are not predictable.

Suggested Citation

  • Beccar-Varela, Maria P. & Mariani, Maria C. & Tweneboah, Osei K. & Florescu, Ionut, 2017. "Analysis of the Lehman Brothers collapse and the Flash Crash event by applying wavelets methodologies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 474(C), pages 162-171.
    • Handle: RePEc:eee:phsmap:v:474:y:2017:i:c:p:162-171
    DOI: 10.1016/j.physa.2017.01.064
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437117300742
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2017.01.064?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mariani, M.C. & Florescu, I. & SenGupta, I. & Beccar Varela, M.P. & Bezdek, P. & Serpa, L., 2013. "Lévy models and scale invariance properties applied to Geophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 824-839.
    2. Mariani, Maria C. & Tweneboah, Osei K., 2016. "Stochastic differential equations applied to the study of geophysical and financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 443(C), pages 170-178.
    3. Silvo Dajčman, 2013. "Interdependence Between Some Major European Stock Markets - A Wavelet Lead/Lag Analysis," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(1), pages 28-49.
    4. Mariani, M.C. & Florescu, I. & Beccar Varela, M.P. & Ncheuguim, E., 2009. "Long correlations and Levy models applied to the study of memory effects in high frequency (tick) data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(8), pages 1659-1664.
    5. Beccar-Varela, Maria P. & Gonzalez-Huizar, Hector & Mariani, Maria C. & Tweneboah, Osei K., 2016. "Use of wavelets techniques to discriminate between explosions and natural earthquakes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 457(C), pages 42-51.
    6. repec:zbw:bofrdp:2005_027 is not listed on IDEAS
    7. Mariani, M.C. & Bezdek, P. & Serpa, L. & Florescu, I., 2011. "Ising type models applied to Geophysics and high frequency market data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(23), pages 4396-4402.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shoji, Isao & Nozawa, Masahiro, 2022. "Geometric analysis of nonlinear dynamics in application to financial time series," Chaos, Solitons & Fractals, Elsevier, vol. 164(C).
    2. Isao Shoji & Masahiro Nozawa, 2020. "A geometric analysis of nonlinear dynamics and its application to financial time series," Papers 2012.11825, arXiv.org.
    3. Mariani, Maria C. & Bhuiyan, Md Al Masum & Tweneboah, Osei K. & Beccar-Varela, Maria P. & Florescu, Ionut, 2020. "Analysis of stock market data by using Dynamic Fourier and Wavelets techniques," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 537(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beccar-Varela, Maria P. & Gonzalez-Huizar, Hector & Mariani, Maria C. & Tweneboah, Osei K., 2016. "Use of wavelets techniques to discriminate between explosions and natural earthquakes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 457(C), pages 42-51.
    2. Habtemicael, Semere & SenGupta, Indranil, 2014. "Ornstein–Uhlenbeck processes for geophysical data analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 399(C), pages 147-156.
    3. Mariani, Maria C. & Basu, Kanadpriya, 2015. "Spline interpolation techniques applied to the study of geophysical data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 428(C), pages 68-79.
    4. Mariani, Maria C. & Tweneboah, Osei K., 2016. "Stochastic differential equations applied to the study of geophysical and financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 443(C), pages 170-178.
    5. Wang, Xiao-Tian & Wu, Min & Zhou, Ze-Min & Jing, Wei-Shu, 2012. "Pricing European option with transaction costs under the fractional long memory stochastic volatility model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1469-1480.
    6. Gerlich, Nikolas & Rostek, Stefan, 2015. "Estimating serial correlation and self-similarity in financial time series—A diversification approach with applications to high frequency data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 434(C), pages 84-98.
    7. Wang, Xiao-Tian & Zhu, En-Hui & Tang, Ming-Ming & Yan, Hai-Gang, 2010. "Scaling and long-range dependence in option pricing II: Pricing European option with transaction costs under the mixed Brownian–fractional Brownian model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(3), pages 445-451.
    8. Sung Ik Kim, 2022. "ARMA–GARCH model with fractional generalized hyperbolic innovations," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-25, December.
    9. Maria C. Mariani & William Kubin & Peter K. Asante & Osei K. Tweneboah & Maria P. Beccar-Varela & Sebastian Jaroszewicz & Hector Gonzalez-Huizar, 2020. "Self-Similar Models: Relationship between the Diffusion Entropy Analysis, Detrended Fluctuation Analysis and Lévy Models," Mathematics, MDPI, vol. 8(7), pages 1-20, June.
    10. Mariani, M.C. & Florescu, I. & Beccar Varela, M.P. & Ncheuguim, E., 2010. "Study of memory effects in international market indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(8), pages 1653-1664.
    11. Mariani, M.C. & Florescu, I. & SenGupta, I. & Beccar Varela, M.P. & Bezdek, P. & Serpa, L., 2013. "Lévy models and scale invariance properties applied to Geophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 824-839.
    12. Chen, Hong & Zhu, Li & Jia, GuoZhu, 2020. "MF-DCCA between molecular properties and aqueous solubility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 556(C).
    13. Sun, Qingru & Gao, Xiangyun & An, Haizhong & Guo, Sui & Liu, Xueyong & Wang, Ze, 2021. "Which time-frequency domain dominates spillover in the Chinese energy stock market?," International Review of Financial Analysis, Elsevier, vol. 73(C).
    14. Maria P. Beccar-Varela & Md Al Masum Bhuiyan & Maria C. Mariani & Osei K. Tweneboah, 2019. "Analytic Methods for Solving Higher Order Ordinary Differential Equations," Mathematics, MDPI, vol. 7(9), pages 1-17, September.
    15. He, Xinjiang & Chen, Wenting, 2014. "The pricing of credit default swaps under a generalized mixed fractional Brownian motion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 404(C), pages 26-33.
    16. Maria C Mariani & Md Al Masum Bhuiyan & Osei K Tweneboah & Hector Gonzalez-Huizar & Ionut Florescu, 2019. "Volatility Models Applied to Geophysics and High Frequency Financial Market Data," Papers 1901.09145, arXiv.org.
    17. Mariani, Maria C. & Bhuiyan, Md Al Masum & Tweneboah, Osei K. & Gonzalez-Huizar, Hector & Florescu, Ionut, 2018. "Volatility models applied to geophysics and high frequency financial market data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 304-321.
    18. Wang, Xiao-Tian, 2011. "Scaling and long-range dependence in option pricing V: Multiscaling hedging and implied volatility smiles under the fractional Black–Scholes model with transaction costs," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(9), pages 1623-1634.
    19. Wang, Xiao-Tian, 2010. "Scaling and long-range dependence in option pricing I: Pricing European option with transaction costs under the fractional Black–Scholes model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(3), pages 438-444.
    20. Wang, Xiao-Tian, 2010. "Scaling and long range dependence in option pricing, IV: Pricing European options with transaction costs under the multifractional Black–Scholes model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(4), pages 789-796.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:474:y:2017:i:c:p:162-171. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.