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Empirical and Theoretical Status of Discrete Scale Invariance in Financial Crashes

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  • Anders Johansen

    (UCLA)

  • Didier Sornette

    (UCLA & CNRS FRANCE)

  • Olivier Ledoit

    (Anderson Graduate School of Management)

Abstract

We present a synthesis of all the available empirical evidence in the light of recent theoretical developments for the existence of characteristic log-periodic signatures of growing bubbles in a variety of markets including 8 unrelated crashes from 1929 to 1998 on stock markets as diverse as the US, Hong-Kong or the Russian market and on currencies. To our knowledge, no major financial crash preceded by an extended bubble has occurred in the past 2 decades without exhibiting a similar log-periodic signature

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File URL: http://128.118.178.162/eps/fin/papers/9903/9903006.ps.gz
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 9903006.

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Length: 20 pages
Date of creation: 21 Mar 1999
Date of revision:
Handle: RePEc:wpa:wuwpfi:9903006

Note: Type of Document - postscript; prepared on Latex; pages: 20 ; figures: 11 fugures included. Submitted to Journal of Risk
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Web page: http://128.118.178.162

Related research

Keywords: bubble crash log-periodic Nikkei prediction acceleration critical;

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References

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  1. A. Johansen & D. Sornette, 1998. "Stock market crashes are outliers," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 1(2), pages 141-143, January.
  2. Blanchard, Olivier Jean, 1979. "Speculative bubbles, crashes and rational expectations," Economics Letters, Elsevier, vol. 3(4), pages 387-389.
  3. S. Gluzman & V. I. Yukalov, 1997. "Renormalization Group Analysis of October Market Crashes," Papers cond-mat/9710336, arXiv.org, revised Apr 1998.
  4. Laurent Laloux & Marc Potters & Rama Cont & Jean-Pierre Aguilar & Jean-Philippe Bouchaud, 1998. "Are Financial Crashes Predictable?," Papers cond-mat/9804111, arXiv.org.
  5. Kirill Ilinski, 1999. "Critical Crashes?," Papers cond-mat/9903142, arXiv.org.
  6. Sornette, Didier & Johansen, Anders, 1997. "Large financial crashes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 245(3), pages 411-422.
  7. Sornette, Didier & Johansen, Anders, 1998. "A hierarchical model of financial crashes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 261(3), pages 581-598.
  8. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
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