A log-periodic fit for the flash crash of May 6, 2010

We show that a two-harmonic log-periodic formula fits the high-frequency data from the Dow Jones Industrial Average index, which encompass the recent episode known as the “flash crash†of May 6, 2010.flash crash, crashes, log-periodicity

Smart Rescue Drones to Find Snowslide Victims

In the approach of using autonomous robots to find victims on risk zones, there are specific ones that can reach the victims faster, the Unmanned Autonomous Vehicles (UAVs), better known as Drones. For this to happen, artificial intelligence algorithms were designed to teach them to search for the victims faster. On this paper, a simulation of three drones flying on different environments was made based on a Hidden Markov Models with KNN classifier as an artificial intelligence approach for the learning. The results revealed that for some environments, based on memory to store the paths and the classification of the objects, different hardware settings for the drones can be needed

Impact of Capital Controls and Transaction Costs on the Return Distribution of Dually Traded Securities: Evidence from Chile and Argentina

In this paper we compare the distributions of ADR returns and the returns of the locally traded shares between Chile and Argentina. This comparison is interesting because both countries are emerging economies with a similar free market orientation. Both countries have similar free market orientation, but they differ in two important respects: (1) exchange rate regime and (2) restrictions to foreign investments. We find several differences between the two economies. Consistent with previous research, we find that the volatility of ADR returns tends to be higher than the return volatility of the underlying securities. We also find that the return distributions of Chilean ADRs are significantly different from the distributions of the returns on the respective underlying Chilean shares. The results reveal that while the mean returns are the same, the return standard deviations are significantly different. In contrast, Argentinean ADRs and their respective underlying shares tend to have the same distribution of returns. Finally, we employ a threshold model to estimate the transaction cost of trading the ADRs and the locally traded shares. We find that transaction costs that must be added to the returns difference before arbitrage is possible are between 1% and 2% for Chilean ADRs, and slightly lower - 0.66% to 1.65% for Argentinean ADRs. We also find that the daily return differential reversion caused by arbitrage activities is around 30% for Chilean ADRs and 40% for Argentinean ADRs.

The relative efficiency of stockmarkets

Financial economists usually assess market efficiency in absolute terms. This is a shortcoming. One way of dealing with the relative efficiency of markets is to resort to the efficiency interpretation provided by algorithmic complexity theory. This paper employs such an approach in order to rank 36 stock exchanges and 37 individual company stocks in terms of their relative efficiency.

Biological correlates of the Allais paradox

We conducted a questionnaire study with student subjects to look for explicit correlations between selected biological characteristics of the subjects and manifestation of the Allais paradox in the pattern of their choices between sets of two pairs of risky prospects. We find that particular bio-characteristics, such as gender, menstrual cycle, mother’s age, parenthood, digit ratio, perceived negative life events, and emotional state, can be related to the paradox. Women, in particular if not menstruating, are less susceptible to the paradox. Those born to not-too-young mothers are also less prone to the paradox. The same holds true for those who father children, those with high prenatal testosterone exposure, who have reported many negative life events, and those who were anxious, excited, aroused, happy, active, and fresh at the time of the experiment. Further, left-handers and atheists may be less inclined to exhibit the paradox.Allais paradox; choice under risk; biological characteristics

Biological correlates of the Allais paradox - updated

We conducted a questionnaire study with student subjects to look for explicit correlations between selected biological characteristics of the subjects and manifestation of the Allais paradox in the pattern of their choices between sets of two pairs of risky prospects. We found that particular characteristics, such as gender, menstrual cycle, mother’s age at delivery, parenthood, second- to fourth-digit ratio, perceived negative life events, and emotional state, can be related to the paradox. Women,particularly when not menstruating, are less susceptible to the paradox. Those born to not-too-young mothers are also less prone to the paradox. The same holds true for men who have fathered children and had been exposed to high levels of prenatal testosterone, people who had experienced many negative life events, and those who were anxious, excited, aroused, happy, active, or fresh at the time of the experiment. Further, left-handers and atheists may be less inclined to display the paradox.Allais paradox; choice under risk; biological characteristics; experimental economics

Risk-seeking behavior of preschool children in a gambling task

A recent neurobiology study showed that monkeys systematically prefer risky targets in a visual gambling task. We set a similar experiment with preschool children to assess their attitudes toward risk and found the children, like the monkeys, to be risk seeking. This suggests that adult humans are not born risk averse, but become risk averse. Our experiment also suggests that this behavioral change may be due to learning from negative experiences in their risky choices. We also showed that though emotional states and predetermined prenatal testosterone can influence children’s preferences toward risk, these factors could not override learning experiences.Risk; Children

Scaling power laws in the Sao Paulo Stock Exchange

The scaling of the probability distribution of the Sao Paulo Stock Exchange index is shown to be described by a Levy stable stochastic process for the modal region of the distribution. Data refer to daily records for the 30-year period 1968-1998. The truncated Levy process is characterized by a scaling index of 1.66. Scaling power laws are also shown to be present in the mean and standard deviation of the series as the time horizon is increased. A power law is also found for the autocorrelation time of the natural logs of the index series. The deviations from the line that best fits the natural logs of the series are also found to be short range autocorrelated and to follow an exponential decay.complex systems

Hurst exponents, power laws, and efficiency in the Brazilian foreign exchange market

We find evidence of weak informational efficiency in the Brazilian daily foreign exchange market using Hurst exponents (Hurst 1951, 1955, Feder 1988), which offer an alternative (from statistical physics) to traditional econometric gauges. We show that a trend toward efficiency has been reverted since the crisis of 1999. We also find power laws (Mantegna and Stanley 2000) in means, volatilities, the Hurst exponents, autocorrelation times, and complexity indices of returns for varying time lags.econophysics