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The Geometry of Crashes - A Measure of the Dynamics of Stock Market Crises

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Author Info
Tanya Araujo
Francisco Louçã

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Abstract

This paper investigates the dynamics of stocks in the S&P500 index for the last 30 years. Using a stochastic geometry technique, we investigate the evolution of the market space and define a new measure for that purpose, which is a robust index of the dynamics of the market structure and provides information on the intensity and the sectoral impact of the crises. With this measure, we analyze the effects of some extreme phenomena on the geometry of the market. Nine crashes between 1987 and 2001 are compared by looking at the way they modify the shape of the manifold that describes the S&P500 market space. These crises are identified as (a) structural, (b) general and (c) local.

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Publisher Info
Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2005/15.

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Date of creation: 2005
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Handle: RePEc:ise:isegwp:wp152005

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Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: http://www.iseg.utl.pt/departamentos/economia/

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Related research
Keywords: financial markets; stochastic geometry; complexity; market spaces; market structures.;

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Find related papers by JEL classification:
C0 - Mathematical and Quantitative Methods - - General
G1 - Financial Economics - - General Financial Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. T. Di Matteo & T. Aste & R. N. Mantegna, 2004. "An interest rates cluster analysis," Quantitative Finance Papers cond-mat/0401443, arXiv.org. [Downloadable!]
  2. G. Bonanno & G. Caldarelli & F. Lillo & S. Micciche` & N. Vandewalle & R. N. Mantegna, 2004. "Networks of equities in financial markets," Quantitative Finance Papers cond-mat/0401300, arXiv.org. [Downloadable!]
  3. A. Johansen & D. Sornette, 2002. "Endogenous versus Exogenous Crashes in Financial Markets," Quantitative Finance Papers cond-mat/0210509, arXiv.org. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tanya Araújo & Francisco Louçã, 2008. "Bargaining Clouds, or Mathematics as a Metaphoric Exploration of the Unexpected," Working Papers 2008/27, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  2. Tanya Araujo & Francisco Louçã, 2007. "The Seismography of Crashes in Financial Markets," Working Papers 2007/05, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  3. Michael J. Naylor & Lawrence C. Rose & Brendan J. Moyle, 2006. "Topology of Foreign Exchange Markets using Hierarchical Structure Methods," Quantitative Finance Papers physics/0608084, arXiv.org, revised Nov 2006. [Downloadable!]
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