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Log-Periodic Crashes Revisited

  • Raul Matsushita

    (University of Brasilia)

  • Iram Gleria

    (Federal University of Alagoas)

  • Annibal Figueiredo

    (University of Brasilia)

  • Sergio Da Silva

    (Federal University of Santa Catarina)

We revisit the finding that crashes can be deterministic and governed by log-periodic formulas [D. Sornette, A. Johansen, Significance of log-periodic precursors to financial crashes, Quant. Finance 1 (2001) 452–471; D. Sornette, W.X. Zhou, The US 2000–2002 market descent: how much longer and deeper?, Quant. Finance 2 (2002) 468–481]. One- and two-harmonic equations are usually employed to fit daily data during bubble episodes. But a three-harmonics has been shown to fit anti-bubbles [A. Johansen, D. Sornette, Financial “anti-bubbles”: log-periodicity in gold and Nikkei collapses, Int. J. Mod. Phys. C 10 (1999) 563–575]. Here we show that the three-harmonic formula can work for bubble episodes as well as anti-bubbles. This is illustrated with daily data from the Brazilian real-US dollar exchange rate. And we also show that the three-harmonics can fit an intraday data set from that foreign exchange rate.

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Paper provided by EconWPA in its series Finance with number 0508005.

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Date of creation: 02 Aug 2005
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Handle: RePEc:wpa:wuwpfi:0508005
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  1. D. Sornette & A. Johansen, 2001. "Significance of log-periodic precursors to financial crashes," Papers cond-mat/0106520,
  2. D. Sornette & A. Johansen, 2001. "Significance of log-periodic precursors to financial crashes," Quantitative Finance, Taylor & Francis Journals, vol. 1(4), pages 452-471.
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