Determining bottom price-levels after a speculative peak
During a stock market peak the price of a given stock ($ i $) jumps from an initial level $ p_1(i) $ to a peak level $ p_2(i) $ before falling back to a bottom level $ p_3(i) $. The ratios $ A(i) = p_2(i)/p_1(i) $ and $ B(i)= p_3(i)/p_1(i) $ are referred to as the peak- and bottom-amplitude respectively. The paper shows that for a sample of stocks there is a linear relationship between $ A(i) $ and $ B(i) $ of the form: $ B=0.4A+b $. In words, this means that the higher the price of a stock climbs during a bull market the better it resists during the subsequent bear market. That rule, which we call the resilience pattern, also applies to other speculative markets. It provides a useful guiding line for Monte Carlo simulations.
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.:
- Goldenberg, J & Libai, B & Solomon, S & Jan, N & Stauffer, D, 2000. "Marketing percolation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 284(1), pages 335-347.
- V. Plerou & P. Gopikrishnan & L. A. N. Amaral & M. Meyer & H. E. Stanley, 1999. "Scaling of the distribution of price fluctuations of individual companies," Papers cond-mat/9907161, arXiv.org.
- B. M. Roehner & D. Sornette, 1998. "The sharp peak-flat trough pattern and critical speculation," Papers cond-mat/9802234, arXiv.org.
- Bertrand Roehner & D. Sornette, 1999. "Analysis of the phenomenon of speculative trading in one of its basic manifestations: postage stamp bubbles," Papers cond-mat/9906435, arXiv.org.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:cond-mat/0009222. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
If references are entirely missing, you can add them using this form.