IDEAS home Printed from https://ideas.repec.org/a/wsi/ijmpcx/v10y1999i04ns0129183199000437.html
   My bibliography  Save this article

Financial "Anti-Bubbles": Log-Periodicity In Gold And Nikkei Collapses

Author

Listed:
  • A. JOHANSEN

    (Institute of Geophysics and Planetary Physics, University of California, Los Angeles, California 90095, USA)

  • D. SORNETTE

    (Institute of Geophysics and Planetary Physics, University of California, Los Angeles, California 90095, USA;
    Department of Earth and Space Science, University of California, Los Angeles, California 90095, USA;
    Laboratoire de Physique de la Matière Condensée, CNRS UMR6622 and Université de Nice-Sophia Antipolis, B.P. 71, Parc Valrose, 06108 Nice Cedex 2, France)

Abstract

We propose that the herding behavior of traders leads not only to speculative bubbles with accelerating over-valuations of financial markets possibly followed by crashes, but also to "anti-bubbles" with decelerating market devaluations following all-time highs. For this, we propose a simple market dynamics model in which the demand decreases slowly with barriers that progressively quench in, leading to a power law decay of the market price characterized by decelerating log-periodic oscillations. We document this behavior of the Japanese Nikkei stock index from 1990 to present and of the gold future prices after 1980, both after their all-time highs. We perform simultaneously parametric and nonparametric analyses that are fully consistent with each other. We extend the parametric approach to the next order of perturbation, comparing the log-periodic fits with one, two and three log-frequencies, the latter providing a prediction for the general trend in the coming years. The nonparametric power spectrum analysis shows the existence of log-periodicity with high statistical significance, with a preferred scale ratio ofλ≈3.5for the Nikkei index andλ≈1.9for the Gold future prices, comparable to the values obtained for speculative bubbles leading to crashes.

Suggested Citation

  • A. Johansen & D. Sornette, 1999. "Financial "Anti-Bubbles": Log-Periodicity In Gold And Nikkei Collapses," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 10(04), pages 563-575.
    • Handle: RePEc:wsi:ijmpcx:v:10:y:1999:i:04:n:s0129183199000437
    DOI: 10.1142/S0129183199000437
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0129183199000437
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0129183199000437?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.

    Citations

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


    Cited by:

    1. Hans-Christian Graf v. Bothmer, 2003. "Significance of log-periodic signatures in cumulative noise," Papers cond-mat/0302507, arXiv.org, revised May 2003.
    2. Zhou, Wei-Xing & Sornette, Didier, 2006. "Fundamental factors versus herding in the 2000–2005 US stock market and prediction," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 360(2), pages 459-482.
    3. Wei-Xing Zhou & Didier Sornette, 2003. "Nonparametric Analyses Of Log-Periodic Precursors To Financial Crashes," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 14(08), pages 1107-1125.
    4. Boon Kin Teh & Siew Ann Cheong, 2016. "The Asian Correction Can Be Quantitatively Forecasted Using a Statistical Model of Fusion-Fission Processes," PLOS ONE, Public Library of Science, vol. 11(10), pages 1-13, October.
    5. Piotr Gnacinski & Danuta Makowiec, 2003. "Another type of log-periodic oscillations on Polish stock market?," Papers cond-mat/0307323, arXiv.org, revised Aug 2003.
    6. Wanfeng Yan & Edgar van Tuyll van Serooskerken, 2015. "Forecasting Financial Extremes: A Network Degree Measure of Super-Exponential Growth," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-15, September.
    7. A. Johansen & D. Sornette, 2002. "Endogenous versus Exogenous Crashes in Financial Markets," Papers cond-mat/0210509, arXiv.org.
    8. 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.
    9. Bikramaditya Ghosh & Spyros Papathanasiou & Nikita Ramchandani & Dimitrios Kenourgios, 2021. "Diagnosis and Prediction of IIGPS’ Countries Bubble Crashes during BREXIT," Mathematics, MDPI, vol. 9(9), pages 1-14, April.
    10. Fry, John, 2012. "Exogenous and endogenous crashes as phase transitions in complex financial systems," MPRA Paper 36202, University Library of Munich, Germany.
    11. Zhou, Wei & Huang, Yang & Chen, Jin, 2018. "The bubble and anti-bubble risk resistance analysis on the metal futures in China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 947-957.
    12. Focardi, Sergio & Cincotti, Silvano & Marchesi, Michele, 2002. "Self-organization and market crashes," Journal of Economic Behavior & Organization, Elsevier, vol. 49(2), pages 241-267, October.
    13. M. Ausloos & K. Ivanova & N. Vandewalle, 2001. "Crashes : symptoms, diagnoses and remedies," Papers cond-mat/0104127, arXiv.org, revised Apr 2001.
    14. Didier Sornette & Wei-Xing Zhou, 2003. "The US 2000-2002 market descent: clarification," Quantitative Finance, Taylor & Francis Journals, vol. 3(3), pages 39-41.
    15. 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.
    16. V. Filimonov & G. Demos & D. Sornette, 2017. "Modified profile likelihood inference and interval forecast of the burst of financial bubbles," Quantitative Finance, Taylor & Francis Journals, vol. 17(8), pages 1167-1186, August.
    17. Filimonov, V. & Sornette, D., 2013. "A stable and robust calibration scheme of the log-periodic power law model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(17), pages 3698-3707.

    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:wsi:ijmpcx:v:10:y:1999:i:04:n:s0129183199000437. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijmpc/ijmpc.shtml .

    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.