6,952 research outputs found
Non-Parametric Analyses of Log-Periodic Precursors to Financial Crashes
We apply two non-parametric methods to test further the hypothesis that
log-periodicity characterizes the detrended price trajectory of large financial
indices prior to financial crashes or strong corrections. The analysis using
the so-called (H,q)-derivative is applied to seven time series ending with the
October 1987 crash, the October 1997 correction and the April 2000 crash of the
Dow Jones Industrial Average (DJIA), the Standard & Poor 500 and Nasdaq
indices. The Hilbert transform is applied to two detrended price time series in
terms of the ln(t_c-t) variable, where t_c is the time of the crash. Taking all
results together, we find strong evidence for a universal fundamental
log-frequency corresponding to the scaling ratio . These values are in very good agreement with those obtained in
past works with different parametric techniques.Comment: Latex document 13 pages + 58 eps figure
Significance of log-periodic precursors to financial crashes
We clarify the status of log-periodicity associated with speculative bubbles
preceding financial crashes. In particular, we address Feigenbaum's [2001]
criticism and show how it can be rebuked. Feigenbaum's main result is as
follows: ``the hypothesis that the log-periodic component is present in the
data cannot be rejected at the 95% confidence level when using all the data
prior to the 1987 crash; however, it can be rejected by removing the last year
of data.'' (e.g., by removing 15% of the data closest to the critical point).
We stress that it is naive to analyze a critical point phenomenon, i.e., a
power law divergence, reliably by removing the most important part of the data
closest to the critical point. We also present the history of log-periodicity
in the present context explaining its essential features and why it may be
important. We offer an extension of the rational expectation bubble model for
general and arbitrary risk-aversion within the general stochastic discount
factor theory. We suggest guidelines for using log-periodicity and explain how
to develop and interpret statistical tests of log-periodicity. We discuss the
issue of prediction based on our results and the evidence of outliers in the
distribution of drawdowns. New statistical tests demonstrate that the 1% to 10%
quantile of the largest events of the population of drawdowns of the Nasdaq
composite index and of the Dow Jones Industrial Average index belong to a
distribution significantly different from the rest of the population. This
suggests that very large drawdowns result from an amplification mechanism that
may make them more predictable than smaller market moves.Comment: Latex document of 38 pages including 16 eps figures and 3 tables, in
press in Quantitative Financ
Stock market crashes are outliers
We call attention against what seems to a widely held misconception according
to which large crashes are the largest events of distributions of price
variations with fat tails. We demonstrate on the Dow Jones Industrial index
that with high probability the three largest crashes in this century are
outliers. This result supports suggestion that large crashes result from
specific amplification processes that might lead to observable pre-cursory
signatures.Comment: 8 pages, 3 figures (accepted in European Physical Journal B
A Critical Behaviour of Anomalous Currents, Electric-Magnetic Universality and CFT_4
We discuss several aspects of superconformal field theories in four
dimensions (CFT_4), in the context of electric-magnetic duality. We analyse the
behaviour of anomalous currents under RG flow to a conformal fixed point in
N=1, D=4 supersymmetric gauge theories. We prove that the anomalous dimension
of the Konishi current is related to the slope of the beta function at the
critical point. We extend the duality map to the (nonchiral) Konishi current.
As a byproduct we compute the slope of the beta function in the strong coupling
regime. We note that the OPE of with itself does not close, but
mixes with a special additional operator which in general is the
Konishi current. We discuss the implications of this fact in generic
interacting conformal theories. In particular, a SCFT_4 seems to be naturally
equipped with a privileged off-critical deformation and this allows us
to argue that electric-magnetic duality can be extended to a neighborhood of
the critical point. We also stress that in SCFT_4 there are two central
charges, c and c', associated with the stress tensor and ,
respectively; c and c' allow us to count both the vector multiplet and the
matter multiplet effective degrees of freedom of the theory.Comment: harvmac tex, 28 pages, 3 figures. Version to be published in Nucl.
Phys.
Analysis of the phenomenon of speculative trading in one of its basic manifestations: postage stamp bubbles
We document and analyze the empirical facts concerning one of the clearest
evidence of speculation in financial trading as observed in the postage
collection stamp market. We unravel some of the mechanisms of speculative
behavior which emphasize the role of fancy and collective behavior. In our
conclusion, we propose a classification of speculative markets based on two
parameters, namely the amplitude of the price peak and a second parameter that
measures its ``sharpness''. This study is offered to anchor modeling efforts to
realistic market constraints and observations.Comment: 9 pages, 5 figures and 2 tables, in press in Int. J. Mod. Phys.
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