arXiv subjects

Didier Sornette

Publications and source records attributed to Didier Sornette.

At least 145 records · Page 8Linked to original sources

arXiv2013

The Barycentric Fixed Mass Method for Multifractal Analysis

We present a novel method to estimate the multifractal spectrum of point distributions. The method incorporates two motivated criteria (barycentric pivot point selection and non-overlapping coverage) in order to reduce edge effects, improve precision and reduce computation time. Implementation of the method on synthetic benchmarks demonstrates the superior performance of the proposed method compared with existing alternatives routinely used in the literature. Finally, we use the method to estimate the multifractal properties of the widely studied growth process of Diffusion Limited Aggregation and compare our results with recent and earlier studies. Our tests support the conclusion of a genuine but weak multifractality of the central core of DLA clusters, with Dq decreasing from 1.75+/-0.01 for q=-10 to 1.65+/-0.01 for q=+10.

cond-mat.stat-mech↗

arXiv2013

Automatic reconstruction of fault networks from seismicity catalogs including location uncertainty

We introduce the Anisotropic Clustering of Location Uncertainty Distributions (ACLUD) method to reconstruct active fault networks on the basis of both earthquake locations and their estimated individual uncertainties. After a massive search through the large solution space of possible reconstructed fault networks, we apply six different validation procedures in order to select the corresponding best fault network. Two of the validation steps (cross-validation and Bayesian Information Criterion (BIC) process the fit residuals, while the four others look for solutions that provide the best agreement with independently observed focal mechanisms. Tests on synthetic catalogs allow us to qualify the performance of the fitting method and of the various validation procedures. The ACLUD method is able to provide solutions that are close to the expected ones, especially for the BIC and focal mechanismbased techniques. The clustering method complemented by the validation step based on focal mechanisms provides good solutions even in the presence of a significant spatial background seismicity rate. Our new fault reconstruction method is then applied to the Landers area in Southern California and compared with previous clustering methods. The results stress the importance of taking into account undersampled sub-fault structures as well as of the spatially inhomogeneous location uncertainties.

physics.geo-ph↗

arXiv2013

High quality topic extraction from business news explains abnormal financial market volatility

Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying how news of all possible types (geopolitical, environmental, social, financial, economic, etc.) affect trading and the pricing of firms in organized stock markets. In this article, we seek to address this issue by performing an analysis of more than 24 million news records provided by Thompson Reuters and of their relationship with trading activity for 206 major stocks in the S&P US stock index. We show that the whole landscape of news that affect stock price movements can be automatically summarized via simple regularized regressions between trading activity and news information pieces decomposed, with the help of simple topic modeling techniques, into their "thematic" features. Using these methods, we are able to estimate and quantify the impacts of news on trading. We introduce network-based visualization techniques to represent the whole landscape of news information associated with a basket of stocks. The examination of the words that are representative of the topic distributions confirms that our method is able to extract the significant pieces of information influencing the stock market. Our results show that one of the most puzzling stylized fact in financial economies, namely that at certain times trading volumes appear to be "abnormally large," can be partially explained by the flow of news. In this sense, our results prove that there is no "excess trading," when restricting to times when news are genuinely novel and provide relevant financial information.

stat.ML↗

arXiv2013

Is There A Real Estate Bubble in Switzerland?

We have analyzed the risks of possible development of bubbles in the Swiss residential real estate market. The data employed in this work has been collected by comparis.ch, and carefully cleaned from duplicate records through a procedure based on supervised machine learning methods. The study uses the log periodic power law (LPPL) bubble model to analyze the development of asking prices of residential properties in all Swiss districts between 2005 and 2013. The results suggest that there are 11 critical districts that exhibit signatures of bubbles, and seven districts where bubbles have already burst. Despite these strong signatures, it is argued that, based on the current economic environment, a soft landing rather than a severe crash is expected.

q-fin.GN↗

arXiv2013

Dynamics and Spatial Distribution of Global Nighttime Lights

Using open source data, we observe the fascinating dynamics of nighttime light. Following a global economic regime shift, the planetary center of light can be seen moving eastwards at a pace of about 60 km per year. Introducing spatial light Gini coefficients, we find a universal pattern of human settlements across different countries and see a global centralization of light. Observing 160 different countries we document the expansion of developing countries, the growth of new agglomerations, the regression in countries suffering from demographic decline and the success of light pollution abatement programs in western countries.

physics.soc-ph↗

arXiv2012

Dynamical Diagnosis and Solutions for Resilient Natural and Social Systems

The concept of resilience embodies the quest towards the ability to sustain shocks, to suffer from these shocks as little as possible, for the shortest time possible, and to recover with the full functionalities that existed before the perturbation. We propose an operation definition of resilience, seeing it as a measure of stress that is complementary to the risk measures. Emphasis is put on the distinction between stressors (the forces acting on the system) and stress (the internal reaction of the system to the stressors). This allows us to elaborate a classification of stress measures and of the possible responses to stressors. We emphasize the need for characterizing the goals of a given system, from which the process of resilience build-up can be defined. Distinguishing between exogenous versus endogenous sources of stress allows one to define the corresponding appropriate responses. The main ingredients towards resilience include (1) the need for continuous multi-variable measurement and diagnosis of endogenous instabilities, (2) diversification and heterogeneity, (3) decoupling, (4) incentives and motivations, and (5) last but not least the (obvious) role of individual strengths. Propositions for individual training towards resilience are articulated. The concept of "crisis flight simulators" is introduced to address the intrinsic human cognitive biases underlying the logic of failures and the illusion of control. We also introduce the "time-at-risk" framework, whose goal is to provide continuous predictive updates on possible scenarios and their probabilistic weights, so that a culture of preparedness and adaptation be promoted. These concepts are presented towards building up personal resilience, resilient societies and resilient financial systems.

physics.soc-ph↗

arXiv2012

Comparing the performance of FA, DFA and DMA using different synthetic long-range correlated time series

Notwithstanding the significant efforts to develop estimators of long-range correlations (LRC) and to compare their performance, no clear consensus exists on what is the best method and under which conditions. In addition, synthetic tests suggest that the performance of LRC estimators varies when using different generators of LRC time series. Here, we compare the performances of four estimators [Fluctuation Analysis (FA), Detrended Fluctuation Analysis (DFA), Backward Detrending Moving Average (BDMA), and centred Detrending Moving Average (CDMA)]. We use three different generators [Fractional Gaussian Noises, and two ways of generating Fractional Brownian Motions]. We find that CDMA has the best performance and DFA is only slightly worse in some situations, while FA performs the worst. In addition, CDMA and DFA are less sensitive to the scaling range than FA. Hence, CDMA and DFA remain "The Methods of Choice" in determining the Hurst index of time series.

physics.data-an↗

arXiv2012

When games meet reality: is Zynga overvalued?

On December 16th, 2011, Zynga, the well-known social game developing company went public. This event followed other recent IPOs in the world of social networking companies, such as Groupon or Linkedin among others. With a valuation close to 7 billion USD at the time when it went public, Zynga became one of the biggest web IPOs since Google. This recent enthusiasm for social networking companies raises the question whether they are overvalued. Indeed, during the few months since its IPO, Zynga showed significant variability, its market capitalization going from 5.6 to 10.2 billion USD, hinting at a possible irrational behavior from the market. To bring substance to the debate, we propose a two-tiered approach to compute the intrinsic value of Zynga. First, we introduce a new model to forecast its user base, based on the individual dynamics of its major games. Next, we model the revenues per user using a logistic function, a standard model for growth in competition. This allows us to bracket the valuation of Zynga using three different scenarios: 3.4, 4.0 and 4.8 billion USD in the base case, high growth and extreme growth scenario respectively. This suggests that Zynga has been overpriced ever since its IPO. Finally, we propose an investment strategy (dated April 19th, 2012 on the arXive), which is based on our diagnostic of a bubble for Zynga and how this herding / bubbly sentiment can be expected to play together with two important coming events (the quarterly financial result announcement around April 26th, 2012 followed by the end of a first lock-up period around April 30th, 2012). On the long term, our analysis indicates that Zynga's price should decrease significantly. The paper ends with a post-mortem analysis added on May 24th, 2012, just before going to press, showing that we have successfully predicted the downward trend of Zynga. Since April 27th, 2012, Zynga dropped 25%.

q-fin.GN↗

arXiv2012

Universality class of balanced flows with bottlenecks: granular flows, pedestrian fluxes and financial price dynamics

We propose and document the evidence for an analogy between the dynamics of granular counter-flows in the presence of bottlenecks or restrictions and financial price formation processes. Using extensive simulations, we find that the counter-flows of simulated pedestrians through a door display many stylized facts observed in financial markets when the density around the door is compared with the logarithm of the price. The stylized properties are present already when the agents in the pedestrian model are assumed to display a zero-intelligent behavior. If agents are given decision-making capacity and adapt to partially follow the majority, periods of herding behavior may additionally occur. This generates the very slow decay of the autocorrelation of absolute return due to an intermittent dynamics. Our finding suggest that the stylized facts in the fluctuations of the financial prices result from a competition of two groups with opposite interests in the presence of a constraint funneling the flow of transactions to a narrow band of prices.

q-fin.ST↗

arXiv2012

Super-exponential bubbles in lab experiments: evidence for anchoring over-optimistic expectations on price

We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster than exponential due to positive feedback. We show that the positive feedback operates by traders continuously upgrading their over-optimistic expectations of future returns based on past prices rather than on realized returns.

q-fin.TR↗

arXiv2012

Quantifying reflexivity in financial markets: towards a prediction of flash crashes

We introduce a new measure of activity of financial markets that provides a direct access to their level of endogeneity. This measure quantifies how much of price changes are due to endogenous feedback processes, as opposed to exogenous news. For this, we calibrate the self-excited conditional Poisson Hawkes model, which combines in a natural and parsimonious way exogenous influences with self-excited dynamics, to the E-mini S&P 500 futures contracts traded in the Chicago Mercantile Exchange from 1998 to 2010. We find that the level of endogeneity has increased significantly from 1998 to 2010, with only 70% in 1998 to less than 30% since 2007 of the price changes resulting from some revealed exogenous information. Analogous to nuclear plant safety concerned with avoiding "criticality", our measure provides a direct quantification of the distance of the financial market to a critical state defined precisely as the limit of diverging trading activity in absence of any external driving.

q-fin.ST↗

arXiv2012

Strong gender differences in reproductive success variance, and the times to the most recent common ancestors

The Time To the Most Recent Common Ancestor (TMRCA) based on human mitochondrial DNA (mtDNA) is estimated to be twice that based on the non-recombining part of the Y chromosome (NRY). These TMRCAs have special demographic implications because mtDNA is transmitted only from mother to child, and NRY from father to son. Therefore, mtDNA reflects female history, and NRY, male history. To investigate what caused the two-to-one female-male TMRCA ratio in humans, we develop a forward-looking agent-based model (ABM) with overlapping generations and individual life cycles. We implement two main mating systems: polygynandry and polygyny with different degrees in between. In each mating system, the male population can be either homogeneous or heterogeneous. In the latter case, some males are `alphas' and others are `betas', which reflects the extent to which they are favored by female mates. A heterogeneous male population implies a competition among males with the purpose of signaling as alphas. The introduction of a heterogeneous male population is found to reduce by a factor 2 the probability of finding equal female and male TMRCAs and shifts the distribution of the TMRCA ratio to higher values. We find that high male-male competition is necessary to reproduce a TMRCA ratio of 2: less than half the males can be alphas and betas can have at most half the fitness of alphas. In addition, in the modes that maximize the probability of having a TMRCA ratio between 1.5 and 2.5, the present generation has 1.4 times as many female as male ancestors. We also tested the effect of sex-biased migration and sex-specific death rates and found that these are unlikely to explain alone the sex-biased TMRCA ratio observed in humans. Our results support the view that we are descended from males who were successful in a highly competitive context, while females were facing a much smaller female-female competition.

q-bio.PE↗

arXiv2012

New empirical tests of the multifractal Omori law for Taiwan

We report new tests on the Taiwan earthquake catalog of the prediction by the Multifractal Stress Activation (MSA) model that the p-value of the Omori law for the rate of aftershocks following a mainshock is an increasing function of its magnitude Mm. This effort is motivated by the quest to validate this crucial prediction of the MSA model and to investigate its possible dependence on local tectonic conditions. With careful attention to the long-term as well as short-term time-dependent magnitude completeness of the Taiwan catalog, and with the use of three different declustering techniques, we confirm the universality of the prediction p(Mm) = (0.09 \pm 0.03) \times Mm + (0.47 \pm 0.10), valid for the SCEC Southern California catalog, the Harvard-CMT worldwide catalog, the JMA Japan catalog and the Taiwan catalog. The observed deviations of the two coefficients of the p(Mm) linear dependence on Mm from catalog to catalog are not significant enough to correlate meaningfully with any tectonic features.

physics.geo-ph↗

arXiv2012

On the distribution of time-to-proof of mathematical conjectures

What is the productivity of Science? Can we measure an evolution of the production of mathematicians over history? Can we predict the waiting time till the proof of a challenging conjecture such as the P-versus-NP problem? Motivated by these questions, we revisit a suggestion published recently and debated in the "New Scientist" that the historical distribution of time-to-proof's, i.e., of waiting times between formulation of a mathematical conjecture and its proof, can be quantified and gives meaningful insights in the future development of still open conjectures. We find however evidence that the mathematical process of creation is too much non-stationary, with too little data and constraints, to allow for a meaningful conclusion. In particular, the approximate unsteady exponential growth of human population, and arguably that of mathematicians, essentially hides the true distribution. Another issue is the incompleteness of the dataset available. In conclusion we cannot really reject the simplest model of an exponential rate of conjecture proof with a rate of 0.01/year for the dataset that we have studied, translating into an average waiting time to proof of 100 years. We hope that the presented methodology, combining the mathematics of recurrent processes, linking proved and still open conjectures, with different empirical constraints, will be useful for other similar investigations probing the productivity associated with mankind growth and creativity.

physics.soc-ph↗

arXiv2011

Valuation of Zynga

On December 16, Zynga, the well-known social game developing company went public. This event is following other recent IPOs in the world of social networking companies, such as Groupon, Linkedin or Pandora to cite a few. With a valuation close to 7 billion USD at the time when it went public, Zynga has become the biggest web IPO since Google. This recent enthusiasm for social networking companies, and in particular Zynga, brings up the question whether or not they are overvalued. The common denominator of all these IPOs is that a lot of estimates about their valuation have been circulating, without any specifics given about the methodology or assumptions used to obtain those numbers. To bring more substance to the debate, we propose a two-tiered approach. First, we introduce a new model to forecast the global user base of Zynga, based on the analysis of the individual dynamics of its major games. Next, we model the revenues per user using a logistic growth function, a standard model for growth in competition. This leads to bracket the valuation of Zynga using three different scenarios (base one, optimistic and very optimistic): 4.17 billion USD in the base case, 5.16 billion in the high growth and 7.02 billion in the extreme growth scenario respectively. Thus, only the unlikely extreme growth scenario could potentially justify today's 6.6 billion USD valuation of Zynga. This suggests that Zynga at its IPO has been overpriced.

q-fin.GN↗

arXiv2011

Spurious trend switching phenomena in financial markets

The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise featureless processes such as random walks. The bias stems from the selection of price peaks that imposes a condition on the statistics of price change and of trade volumes that skew their distributions. For the intertrade times, the extrema and power laws results from the format of transaction data.

q-fin.ST↗

arXiv2011

Prediction of alpine glacier sliding instabilities: a new hope

Mechanical and sliding instabilities are the two processes which may lead to breaking off events of large ice masses. Mechanical instabilities mainly affect unbalanced cold hanging glaciers. For the latter case, a prediction could be achieved based on data of surface velocities and seismic activity. The case of sliding instabilities is more problematic. This phenomenon occurs on temperate glacier tongues. Such instabilities are strongly affected by the subglacial hydrology: melt water may cause (i) a lubrication of the bed and (ii) a decrease of the effective pressure and consequently a decrease of basal friction. Available data from Allalingletscher (Valais) indicate that the glacier tongue experienced an active phase during 2-3 weeks with enhanced basal motion in late summer in most years. In order to scrutinize in more detail the processes governing the sliding instabilities, a numerical model developed to investigate gravitational instabilities in heterogeneous media was applied to Allalingletscher. This model enables to account for various geometric configurations, interaction between sliding and tension cracking and water flow at the bedrock. We could show that both a critical geometrical configuration of the glacier tongue and the existence of a distributed drainage network were the main causes of this catastrophic break-off. Moreover, the analysis of the modeling results diagnose the phenomenon of recoupling of the glacier to its bed as a potential new precursory sign announcing the final break-off. This model casts a gleam of hope for a better understanding of the ultimate rupture of such glacier sliding instabilities.

physics.geo-ph↗

arXiv2011

Optimization of brain and life performance: Striving for playing at the top for the long run

In this essay written with my students and collaborators in mind, I share simple recipes that are easy and often fun to put in practice and that make a big difference in one's life. The seven guiding principles are: (1) sleep, (2) love and sex, (3) deep breathing and daily exercises, (4) water and chewing, (5) fruits, unrefined products, food combination, vitamin D and no meat, (6) power foods, (7) play, intrinsic motivation, positive psychology and will. These simple laws are based on an integration of evolutionary thinking, personal experimentation, and evidence from experiments reported in the scientific literature. I develop their rationality, expected consequences and describe briefly how to put them in practice. I hope that professionals and the broader public may also find some use for it, as I have seen already the positive impacts on some of my students.

q-bio.OT↗