Critical Crashes

Anders Johansen; Didier Sornette

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arXiv · cond-mat/9901035

Critical Crashes

Anders Johansen·Didier Sornette

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Abstract

We argue that the word ``critical'' in the title is not purely literary. Based on our and other previous work on nonlinear complex dynamical systems, we summarize present evidence, on the Oct. 1929, Oct. 1987, Oct. 1987 Hong-Kong, Aug. 1998 global market events and on the 1985 Forex event, for the hypothesis advanced four years ago that stock market crashes are caused by the slow buildup of long-range correlations between traders leading to a collapse of the stock market in one critical instant. We qualify the log-periodic oscillations using a novel non-parametric method that does not rely on any fit: the corresponding log-periodogram exhibits a strong statistically significant peak for all six crashes examined, pointing at approximately the same prefered scaling ratio around 2.

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Anders Johansen, Didier Sornette. 1999-01-06. Critical Crashes. https://arxiv.org/abs/cond-mat/9901035

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