Exogenous and endogenous crashes as phase transitions in complex financial systems
AbstractIn this paper we provide a unifying framework for a set of seemingly disparate models for exogenous and endogenous shocks in complex financial systems. Markets operate by balancing intrinsic levels of risk and return. This remains true even in the midst of transitory external shocks. Changes in market regime (bearish to bullish and bullish to bearish) can be explicitly shown to represent a phase transition from random to deterministic behaviour in prices. The resulting models refine the empirical analysis in a number of previous papers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36202.
Date of creation: 26 Jan 2012
Date of revision:
Exogenous; Endogenous; Financial Crashes; Bubbles; Econophysics;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- C00 - Mathematical and Quantitative Methods - - General - - - General
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
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.:
- Johansen, Anders & Sornette, Didier, 2000. "Download relaxation dynamics on the WWW following newspaper publication of URL," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 276(1), pages 338-345.
- Zeira, Joseph, 1993.
"Informational Overshooting, Booms and Crashes,"
CEPR Discussion Papers
823, C.E.P.R. Discussion Papers.
- George Chang & James Feigenbaum, 2008. "Detecting log-periodicity in a regime-switching model of stock returns," Quantitative Finance, Taylor & Francis Journals, vol. 8(7), pages 723-738.
- Sornette, D & Helmstetter, A, 2003. "Endogenous versus exogenous shocks in systems with memory," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 318(3), pages 577-591.
- David S. Bree & Nathan Lael Joseph, 2010. "Fitting the Log Periodic Power Law to financial crashes: a critical analysis," Papers 1002.1010, arXiv.org, revised Apr 2013.
- George Chang & James Feigenbaum, 2006. "A Bayesian analysis of log-periodic precursors to financial crashes," Quantitative Finance, Taylor & Francis Journals, vol. 6(1), pages 15-36.
- Anders Johansen & Didier Sornette, 1999. "Critical Crashes," Papers cond-mat/9901035, arXiv.org.
- Anders Johansen & Didier Sornette, 2010. "Shocks, Crashes and Bubbles in Financial Markets," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(2), pages 201-253.
- Fantazzini, Dean & Geraskin, Petr, 2011.
"Everything You Always Wanted to Know about Log Periodic Power Laws for Bubble Modelling but Were Afraid to Ask,"
47869, University Library of Munich, Germany.
- 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.
- David S. Brée & Damien Challet & Pier Paolo Peirano, 2013.
"Prediction accuracy and sloppiness of log-periodic functions,"
Taylor & Francis Journals, vol. 13(2), pages 275-280, January.
- David Br\'ee & Damien Challet & Pier Paolo Peirano, 2010. "Prediction accuracy and sloppiness of log-periodic functions," Papers 1006.2010, arXiv.org.
- J. A. Feigenbaum, 2001. "A statistical analysis of log-periodic precursors to financial crashes," Quantitative Finance, Taylor & Francis Journals, vol. 1(3), pages 346-360.
- 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.
- A. Johansen & D. Sornette, 1999. "Financial ``Anti-Bubbles'': Log-Periodicity in Gold and Nikkei collapses," Papers cond-mat/9901268, arXiv.org.
- J. A. Feigenbaum, 2001. "More on a statistical analysis of log-periodic precursors to financial crashes," Quantitative Finance, Taylor & Francis Journals, vol. 1(5), pages 527-532.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.