General theory of the modified Gutenberg-Richter law for large seismic moments

The Gutenberg-Richter power law distribution of earthquake sizes is one of the most famous example illustrating self-similarity. It is well-known that the Gutenberg-Richter distribution has to be modified for large seismic moments, due to energy conservation and geometrical reasons. Several models have been proposed, either in terms of a second power law with a larger b-value beyond a cross-over magnitude, or based on a ``hard'' magnitude cut-off or a ``soft'' magnitude cut-off using an exponential taper. Since the large scale tectonic deformation is dominated by the very largest earthquakes and since their impact on loss of life and properties is huge, it is of great importance to constrain as much as possible the shape of their distribution. We present a simple and powerful probabilistic theoretical approach that shows that the Gamma distribution is the best model, under the two hypothesis that the Gutenberg-Richter power law distribution holds in absence of any condition (condition of criticality) and that one or several constraints are imposed, either based on conservation laws or on the nature of the observations themselves. The selection of the Gamma distribution does not depend on the specific nature of the constraint. We illustrate the approach with two constraints, the existence of a finite moment release rate and the observation of the size of a maximum earthquake in a finite catalog. Our predicted ``soft'' maximum magnitudes compare favorably with those obtained by Kagan [1997] for the Flinn-Engdahl regionalization of subduction zones, collision zones and mid-ocean ridges.Comment: 24 pages, including 3 tables, in press in Bull. Seism. Soc. A

Acoustic fluidization for earthquakes?

Melosh [1996] has suggested that acoustic fluidization could provide an alternative to theories that are invoked as explanations for why some crustal faults appear to be weak. We show that there is a subtle but profound inconsistency in the theory that unfortunately invalidates the results. We propose possible remedies but must acknowledge that the relevance of acoustic fluidization remains an open question.Comment: 13 page

Renormalization Group Analysis of the 2000-2002 anti-bubble in the US S&P 500 index: Explanation of the hierarchy of 5 crashes and Prediction

We propose a straightforward extension of our previously proposed log-periodic power law model of the ``anti-bubble'' regime of the USA market since the summer of 2000, in terms of the renormalization group framework to model critical points. Using a previous work by Gluzman and Sornette (2002) on the classification of the class of Weierstrass-like functions, we show that the five crashes that occurred since August 2000 can be accurately modelled by this approach, in a fully consistent way with no additional parameters. Our theory suggests an overall consistent organization of the investors forming a collective network which interact to form the pessimistic bearish ``anti-bubble'' regime with intermittent acceleration of the positive feedbacks of pessimistic sentiment leading to these crashes. We develop retrospective predictions, that confirm the existence of significant arbitrage opportunities for a trader using our model. Finally, we offer a prediction for the unknown future of the US S&P500 index extending over 2003 and 2004, that refines the previous prediction of Sornette and Zhou (2002).Comment: Latex document, 11 eps figures and 1 tabl

2000-2003 Real Estate Bubble in the UK but not in the USA

In the aftermath of the burst of the ``new economy'' bubble in 2000, the Federal Reserve aggressively reduced short-term rates yields in less than two years from 6.5% to 1.25% in an attempt to coax forth a stronger recovery of the US economy. But, there is growing apprehension that this is creating a new bubble in real estate, as strong housing demand is fuelled by historically low mortgage rates. Are we going from Charybdis to Scylla? This question is all the more excruciating at a time when many other indicators suggest a significant deflationary risk. Using economic data, Federal Reserve Chairman A. Greenspan and Governor D.L. Kohn dismissed recently this possibility. Using the theory of critical phenomena resulting from positive feedbacks in markets, we confirm this view point for the US but find that mayhem may be in store for the UK: we unearth the unmistakable signatures (log-periodicity and power law super-exponential acceleration) of a strong unsustainable bubble there, which could burst before the end of the year 2003.Comment: Latex, 22 pages including 8 eps figures; A revised version accepted for publication in Physica

The 2006-2008 Oil Bubble and Beyond

We present an analysis of oil prices in US$ and in other major currencies that diagnoses unsustainable faster-than-exponential behavior. This supports the hypothesis that the recent oil price run-up has been amplified by speculative behavior of the type found during a bubble-like expansion. We also attempt to unravel the information hidden in the oil supply-demand data reported by two leading agencies, the US Energy Information Administration (EIA) and the International Energy Agency (IEA). We suggest that the found increasing discrepancy between the EIA and IEA figures provides a measure of the estimation errors. Rather than a clear transition to a supply restricted regime, we interpret the discrepancy between the IEA and EIA as a signature of uncertainty, and there is no better fuel than uncertainty to promote speculation!Comment: 4 pages; 4 figures, discussion of the oil supply-demand view point and uncertaintie

Icequakes coupled with surface displacements for predicting glacier break-off

A hanging glacier at the east face of Weisshorn (Switzerland) broke off in 2005. We were able to monitor and measure surface motion and icequake activity for 25 days up to three days prior to the break-off. The analysis of seismic waves generated by the glacier during the rupture maturation process revealed four types of precursory signals of the imminent catastrophic rupture: (i) an increase in seismic activity within the glacier, (ii) a decrease in the waiting time between two successive icequakes, (iii) a change in the size-frequency distribution of icequake energy, and (iv) a modification in the structure of the waiting time distributions between two successive icequakes. Morevover, it was possible to demonstrate the existence of a correlation between the seismic activity and the log-periodic oscillations of the surface velocities superimposed on the global acceleration of the glacier during the rupture maturation. Analysis of the seismic activity led us to the identification of two regimes: a stable phase with diffuse damage, and an unstable and dangerous phase characterized by a hierarchical cascade of rupture instabilities where large icequakes are triggered.Comment: 16 pages, 7 figure

Is There a Real-Estate Bubble in the US?

We analyze the quarterly average sale prices of new houses sold in the USA as a whole, in the northeast, midwest, south, and west of the USA, in each of the 50 states and the District of Columbia of the USA, to determine whether they have grown faster-than-exponential which we take as the diagnostic of a bubble. We find that 22 states (mostly Northeast and West) exhibit clear-cut signatures of a fast growing bubble. From the analysis of the S&P 500 Home Index, we conclude that the turning point of the bubble will probably occur around mid-2006.Comment: 7 Elsaet Latex pages + 9 eps figure

"Slimming" of power law tails by increasing market returns

We introduce a simple generalization of rational bubble models which removes the fundamental problem discovered by [Lux and Sornette, 1999] that the distribution of returns is a power law with exponent less than 1, in contradiction with empirical data. The idea is that the price fluctuations associated with bubbles must on average grow with the mean market return r. When r is larger than the discount rate r_delta, the distribution of returns of the observable price, sum of the bubble component and of the fundamental price, exhibits an intermediate tail with an exponent which can be larger than 1. This regime r>r_delta corresponds to a generalization of the rational bubble model in which the fundamental price is no more given by the discounted value of future dividends. We explain how this is possible. Our model predicts that, the higher is the market remuneration r above the discount rate, the larger is the power law exponent and thus the thinner is the tail of the distribution of price returns.Comment: 13 pages + 4 figure

Predictability of catastrophic events: material rupture, earthquakes, turbulence, financial crashes and human birth

We propose that catastrophic events are "outliers" with statistically different properties than the rest of the population and result from mechanisms involving amplifying critical cascades. Applications and the potential for prediction are discussed in relation to the rupture of composite materials, great earthquakes, turbulence and abrupt changes of weather regimes, financial crashes and human parturition (birth).Comment: Latex document of 22 pages including 6 ps figures, in press in PNA

A case study of speculative financial bubbles in the South African stock market 2003-2006

We tested 45 indices and common stocks traded in the South African stock market for the possible existence of a bubble over the period from Jan. 2003 to May 2006. A bubble is defined by a faster-than-exponential acceleration with significant log-periodic oscillations. The faster-than-exponential acceleration characteristics are tested with several different metrics, including nonlinearity on the logarithm of the price and power law fits. The log-periodic properties are investigated in detail using the first-order log-periodic power-law (LPPL) formula, the parametric detrending method, the $(H,q)$-analysis, and the second-order Weierstrass-type model, resulting in a consistent and robust estimation of the fundamental angular log-frequency $\omega_1 =7\pm 2$, in reasonable agreement with previous estimations on many other bubbles in developed and developing markets. Sensitivity tests of the estimated critical times and of the angular log-frequency are performed by varying the first date and the last date of the stock price time series. These tests show that the estimated parameters are robust. With the insight of 6 additional month of data since the analysis was performed, we observe that many of the stocks on the South Africa market experienced an abrupt drop mid-June 2006, which is compatible with the predicted $t_c$ for several of the stocks, but not all. This suggests that the mini-crash that occurred around mid-June of 2006 was only a partial correction, which has resumed into a renewed bubbly acceleration bound to end some times in 2007, similarly to what happened on the S&P500 US market from Oct. 1997 to Aug. 1998.Comment: 20 Latex pages including 10 figures + an appendix (1 table, 10 figures