IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v387y2008i27p6801-6811.html
   My bibliography  Save this article

Comparison study of global and local approaches describing critical phenomena on the Polish stock exchange market

Author

Listed:
  • Czarnecki, Łukasz
  • Grech, Dariusz
  • Pamuła, Grzegorz

Abstract

We confront global and local methods to analyze the financial crash-like events on the Polish financial market from the critical phenomena point of view. These methods are based on the analysis of log-periodicity and the local fractal properties of financial time series in the vicinity of phase transitions (crashes). The whole history (1991–2008) of Warsaw Stock Exchange Index (WIG) describing the largest developing financial market in Europe, is analyzed in a daily time horizon. We find that crash-like events on the Polish financial market are described better by the log-divergent price model decorated with log-periodic behavior than the corresponding power-law-divergent price model. Predictions coming from log-periodicity scenario are verified for all main crashes that took place in WIG history. It is argued that crash predictions within log-periodicity model strongly depend on the amount of data taken to make a fit and therefore are likely to contain huge inaccuracies. Turning to local fractal description, we calculate the so-called local (time dependent) Hurst exponent Hloc for the WIG time series and we find the dependence between the behavior of the local fractal properties of the WIG time series and the crashes appearance on the financial market. The latter method seems to work better than the global approach — both for developing as for developed markets. The current situation on the market, particularly related to the Fed intervention in September’07 and the situation on the market immediately after this intervention is also analyzed from the fractional Brownian motion point of view.

Suggested Citation

  • Czarnecki, Łukasz & Grech, Dariusz & Pamuła, Grzegorz, 2008. "Comparison study of global and local approaches describing critical phenomena on the Polish stock exchange market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(27), pages 6801-6811.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:27:p:6801-6811
    DOI: 10.1016/j.physa.2008.08.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S037843710800719X
    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.2008.08.019?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. M. Ausloos & K. Ivanova & N. Vandewalle, 2001. "Crashes : symptoms, diagnoses and remedies," Papers cond-mat/0104127, arXiv.org, revised Apr 2001.
    Full references (including those not matched with items on IDEAS)

    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. Marcel Ausloos, 2014. "A biased view of a few possible components when reflecting on the present decade financial and economic crisis," Papers 1412.0127, arXiv.org.
    2. Cajueiro, Daniel O. & Tabak, Benjamin M. & Werneck, Filipe K., 2009. "Can we predict crashes? The case of the Brazilian stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(8), pages 1603-1609.
    3. Marcel Ausloos, 2012. "Econophysics in Belgium. The first (?) 15 years," Papers 1212.1946, arXiv.org.

    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:387:y:2008:i:27:p:6801-6811. 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.