arXiv subjects

W. -X. Zhou

Publications and source records attributed to W. -X. Zhou.

At least 19 recordsLinked to original sources

arXiv2021

Robustness of the international oil trade network under targeted attacks to economies

In the international oil trade network (iOTN), trade shocks triggered by extreme events may spread over the entire network along the trade links of the central economies and even lead to the collapse of the whole system. In this study, we focus on the concept of "too central to fail" and use traditional centrality indicators as strategic indicators for simulating attacks on economic nodes, and simulates various situations in which the structure and function of the global oil trade network are lost when the economies suffer extreme trade shocks. The simulation results show that the global oil trade system has become more vulnerable in recent years. The regional aggregation of oil trade is an essential source of iOTN's vulnerability. Maintaining global oil trade stability and security requires a focus on economies with greater influence within the network module of the iOTN. International organizations such as OPEC and OECD established more trade links around the world, but their influence on the iOTN is declining. We improve the framework of oil security and trade risk assessment based on the topological index of iOTN, and provide a reference for finding methods to maintain network robustness and trade stability.

econ.EM↗

arXiv2017

Power-law tails in the distribution of order imbalance

We investigate the probability distribution of order imbalance calculated from the order flow data of 43 Chinese stocks traded on the Shenzhen Stock Exchange. Two definitions of order imbalance are considered based on the order number and the order size. We find that the order imbalance distributions of individual stocks have power-law tails. However, the tail index fluctuates remarkably from stock to stock. We also investigate the distributions of aggregated order imbalance of all stocks at different timescales $Δ{t}$. We find no clear trend in the tail index with respect $Δ{t}$. All the analyses suggest that the distributions of order imbalance are asymmetric.

q-fin.ST↗

arXiv2017

Wax and wane of the cross-sectional momentum and contrarian effects: Evidence from the Chinese stock markets

This paper investigates the time-varying risk-premium relation of the Chinese stock markets within the framework of cross-sectional momentum and contrarian effects by adopting the Capital Asset Pricing Model and the French-Fama three factor model. The evolving arbitrage opportunities are also studied by quantifying the performance of time-varying cross-sectional momentum and contrarian effects in the Chinese stock markets. The relation between the contrarian profitability and market condition factors that could characterize the investment context is also investigated. The results reveal that the risk-premium relation varies over time, and the arbitrage opportunities based on the contrarian portfolios wax and wane over time. The performance of contrarian portfolios are highly dependent on several market conditions. The periods with upward trend of market state, higher market volatility and liquidity, lower macroeconomics uncertainty are related to higher contrarian profitability. These findings are consistent with the Adaptive Markets Hypothesis and have practical implications for market participants.

q-fin.ST↗

arXiv2014

Network Risk and Forecasting Power in Phase-Flipping Dynamical Networks

In order to model volatile real-world network behavior, we analyze phase-flipping dynamical scale-free network in which nodes and links fail and recover. We investigate how stochasticity in a parameter governing the recovery process affects phase-flipping dynamics, and find the probability that no more than q% of nodes and links fail. We derive higher moments of the fractions of active nodes and active links, $f_n(t)$ and $f_{\ell}(t)$, and define two estimators to quantify the level of risk in a network. We find hysteresis in the correlations of $f_n(t)$ due to failures at the node level, and derive conditional probabilities for phase-flipping in networks. We apply our model to economic and traffic networks.

physics.soc-ph↗

arXiv2012

Trading networks, abnormal motifs and stock manipulation

We study trade-based manipulation of stock prices from the perspective of complex trading networks constructed by using detailed information of trades. A stock trading network consists of nodes and directed links, where every trader is a node and a link is formed from one trader to the other if the former sells shares to the latter. Specifically, three abnormal network motifs are investigated, which are found to be formed by a few traders, implying potential intention of price manipulation. We further investigate the dynamics of volatility, trading volume, average trade size and turnover around the transactions associated with the abnormal motifs for large, medium and small trades. It is found that these variables peak at the abnormal events and exhibit a power-law accumulation in the pre-event time period and a power-law relaxation in the post-event period. We also find that the cumulative excess returns are significantly positive after buyer-initiated suspicious trades and exhibit a mild price reversal after seller-initiated suspicious trades. These findings can be better understood in favor of price manipulation. Our work shed new lights into the detection of price manipulation resorting to the abnormal motifs of complex trading networks.

q-fin.TR↗

arXiv2012

Random matrix approach to the dynamics of stock inventory variations

We study the cross-correlation matrix $C_{ij}$ of inventory variations of the most active individual and institutional investors in an emerging market to understand the dynamics of inventory variations. We find that the distribution of cross-correlation coefficient $C_{ij}$ has a power-law form in the bulk followed by exponential tails and there are more positive coefficients than negative ones. In addition, it is more possible that two individuals or two institutions have stronger inventory variation correlation than one individual and one institution. We find that the largest and the second largest eigenvalues ($λ_1$ and $λ_2$) of the correlation matrix cannot be explained by the random matrix theory and the projection of inventory variations on the first eigenvector $u(λ_1)$ are linearly correlated with stock returns, where individual investors play a dominating role. The investors are classified into three categories based on the cross-correlation coefficients $C_{VR}$ between inventory variations and stock returns. Half individuals are reversing investors who exhibit evident buy and sell herding behaviors, while 6% individuals are trending investors. For institutions, only 10% and 8% investors are trending and reversing investors. A strong Granger causality is unveiled from stock returns to inventory variations, which means that a large proportion of individuals hold the reversing trading strategy and a small part of individuals hold the trending strategy. Comparing with the case of Spanish market, Chinese investors exhibit common and market-specific behaviors. Our empirical findings have scientific significance in the understanding of investors' trading behaviors and in the construction of agent-based models for stock markets.

q-fin.ST↗

arXiv2009

The Chinese Equity Bubble: Ready to Burst

Amid the current financial crisis, there has been one equity index beating all others: the Shanghai Composite. Our analysis of this main Chinese equity index shows clear signatures of a bubble build up and we go on to predict its most likely crash date: July 17-27, 2009 (20%/80% quantile confidence interval).

q-fin.ST↗

arXiv2008

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!

q-fin.GN↗

arXiv2007

Numerical investigations of discrete scale invariance in fractals and multifractal measures

Fractals and multifractals and their associated scaling laws provide a quantification of the complexity of a variety of scale invariant complex systems. Here, we focus on lattice multifractals which exhibit complex exponents associated with observable log-periodicity. We perform detailed numerical analyses of lattice multifractals and explain the origin of three different scaling regions found in the moments. A novel numerical approach is proposed to extract the log-frequencies. In the non-lattice case, there is no visible log-periodicity, {\em{i.e.}}, no preferred scaling ratio since the set of complex exponents spread irregularly within the complex plane. A non-lattice multifractal can be approximated by a sequence of lattice multifractals so that the sets of complex exponents of the lattice sequence converge to the set of complex exponents of the non-lattice one. An algorithm for the construction of the lattice sequence is proposed explicitly.

cond-mat.stat-mech↗

arXiv2005

Multifractality of Inverse Statistics of Exit Distances in 3D Fully Developed Turbulence

The inverse structure functions of exit distances have been introduced as a novel diagnostic of turbulence which emphasizes the more laminar regions [1-4]. Using Taylor's frozen field hypothesis, we investigate the statistical properties of the exit distances of empirical 3D fully developed turbulence. We find that the probability density functions of exit distances at different velocity thresholds can be approximated by stretched exponentials with exponents varying with the velocity thresholds below a critical threshold. We show that the inverse structure functions exhibit clear extended self-similarity (ESS). The ESS exponents ξ(p,2) for small p (p<3.5) are well captured by the prediction of ξ(p,2)= p/2 obtained by assuming a universal distribution of the exit distances, while the observed deviations for large p's characterize the dependence of these distributions on the velocity thresholds. By applying a box-counting multifractal analysis of the natural measure constructed on the time series of exit distances, we demonstrate the existence of a genuine multifractality, endowed in addition with negative dimensions. Performing the same analysis of reshuffled time series with otherwise identical statistical properties for which multifractality is absent, we show that multifractality can be traced back to non-trivial dependence in the time series of exit times, suggesting a non-trivial organization of weakly-turbulent regions.

physics.flu-dyn↗

arXiv2004

Testing the Stability of the 2000-2003 US Stock Market "Antibubble"

Since August 2000, the stock market in the USA as well as most other western markets have depreciated almost in synchrony according to complex patterns of drops and local rebounds. In \cite{SZ02QF}, we have proposed to describe this phenomenon using the concept of a log-periodic power law (LPPL) antibubble, characterizing behavioral herding between investors leading to a competition between positive and negative feedbacks in the pricing process. A monthly prediction for the future evolution of the US S&P 500 index has been issued, monitored and updated in \cite{urlprediction}, which is still running. Here, we test the possible existence of a regime switching in the US S&P 500 antibubble. First, we find some evidence that the antibubble has exhibited a transition in log-periodicity described by a so-called second-order log-periodicity. Second, >...

cond-mat.stat-mech↗

arXiv2004

Non-parametric Determination of Real-Time Lag Structure between Two Time Series: the "Optimal Thermal Causal Path" Method

We introduce a novel non-parametric methodology to test for the dynamical time evolution of the lag-lead structure between two arbitrary time series. The method consists in constructing a distance matrix based on the matching of all sample data pairs between the two time series. Then, the lag-lead structure is searched as the optimal path in the distance matrix landscape that minimizes the total mismatch between the two time series, and that obeys a one-to-one causal matching condition. To make the solution robust to the presence of large noise that may lead to spurious structures in the distance matrix landscape, we then generalize this optimal search by introducing a fuzzy search by sampling over all possible paths, each path being weighted according to a multinomial logit or equivalently Boltzmann factor proportional to the exponential of the global mismatch of this path. We present the efficient transfer matrix method that solves the problem and test it on simple synthetic examples to demonstrate its properties and usefulness compared with the standard running-time cross-correlation method. We then apply our `Optimal Thermal Causal Path'' method to the question of the causality between ......

cond-mat.stat-mech↗

arXiv2004

Predictability of large future changes in major financial indices

We present a systematic algorithm testing for the existence of collective self-organization in the behavior of agents in social systems, with a concrete empirical implementation on the Dow Jones Industrial Average index (DJIA) over the 20th century and on Hong Kong Hang Seng composite index (HSI) since 1969. The algorithm combines ideas from critical phenomena, the impact of agents' expectation, multi-scale analysis and the mathematical method of pattern recognition of sparse data. Trained on the three major crashes in DJIA of the century, our algorithm exhibits a remarkable ability for generalization and detects in advance 8 other significant drops or changes of regimes. An application to HSI gives promising results as well. The results are robust with respect to the variations of the recognition algorithm. We quantify the prediction procedure with error diagrams.

cond-mat.stat-mech↗

arXiv2004

Bubble, Critical Zone and the Crash of Royal Ahold

Our analysis of financial data, in terms of super-exponential growth, suggests that the seed of the 2002/03 crisis of the Dutch supermarket giant AHOLD was planted in 1996. It became quite visible in 1999 when the post-bubble destabilization regime was well-developed and acted as the precursor of an inevitable collapse fueled by raising expectations of investors to maintain strong herding pressures. We have adapted Weidlich's theory of opinion formation to describe the formation of buy or sell decisions among investors, based on a competition between the mechanisms of herding and of personal opinion opposing the herd. Among four typical patterns of stock price evolution, we have identified a ``critical zone'' in the model characterized by a strong sensitivity of the price trajectory on the herding and personal inclination parameters. The critical zone describes the maturation of a systemic instability forewarning of an inevitable crash. Classification and recognition of the spontaneous emergence of patterns of stock market evolution based on Weidlich's theory of complex systems, and in particular our discovery of the post-bubble destabilization regime which acts as a precursor to a subsequent crash or antibubble, not only presents the possibility of developing early warning signals but also suggests to top management ways of dealing with the coming crisis.

cond-mat.stat-mech↗

arXiv2004

Discrete Hierarchical Organization of Social Group Sizes

The ``social brain hypothesis'' for the evolution of large brains in primates has led to evidence for the coevolution of neocortical size and social group sizes. Extrapolation of these findings to modern humans indicated that the equivalent group size for our species should be approximately 150 (essentially the number of people known personally as individuals). Here, we combine data on human grouping in a comprehensive and systematic study. Using fractal analysis, we identify with high statistical confidence a discrete hierarchy of group sizes with a preferred scaling ratio close to 3: rather than a single or a continuous spectrum of group sizes, humans spontaneously form groups of preferred sizes organized in a geometrical series approximating 3, 9, 27,... Such discrete scale invariance (DSI) could be related to that identified in signatures of herding behavior in financial markets and might reflect a hierarchical processing of social nearness by human brains.

cond-mat.stat-mech↗

arXiv2003

Causal Slaving of the U.S. Treasury Bond Yield Antibubble by the Stock Market Antibubble of August 2000

Using the descriptive method of log-periodic power laws (LPPL) based on a theory of behavioral herding, we use a battery of parametric and non-parametric tests to demonstrate the existence of an antibubble in the yields with maturities larger than 1 year since October 2000. The concept of ``antibubble'' describes the existence of a specific LPPL pattern that is thought to reflect collective herding effects. From the dependence of the parameters of the LPPL formula as a function of yield maturities and using lagged cross-correlation calculations between the S&P 500 and bond yields, we find strong evidence for the following causality: Stock Market $\to$ Fed Reserve (Federal funds rate) $\to$ short-term yields $\to$ long-term yields (as well as a direct and instantaneous influence of the stock market on the long-term yields). Our interpretation is that the FRB is ``causally slaved'' to the stock market (at least for the studied period), because the later is (taken as) a proxy for the present and future health of the economy.

cond-mat.stat-mech↗

arXiv2003

Antibubble and Prediction of China's stock market and Real-Estate

We document a well-developed log-periodic power-law antibubble in China's stock market, which started in August 2001. We argue that the current stock market antibubble is sustained by a contemporary active unsustainable real-estate bubble in China. The characteristic parameters of the antibubble have exhibited remarkable stability over one year (Oct. 2002-Oct. 2003). Many tests, including predictability over different horizons and time periods, confirm the high significance of the antibubble detection. We predict that the Chinese stock market will stop its negative trend around the end of 2003 and start going up, appreciating by at least 25% in the following 6 months. Notwithstanding the immature nature of the Chinese equity market and the strong influence of government policy, we have found maybe even stronger imprints of herding than in other mature markets. This is maybe due indeed to the immaturity of the Chinese market which seems to attract short-term investors more interested in fast gains than in long-term investments, thus promoting speculative herding.

cond-mat.stat-mech↗

arXiv2003

Evidence of a Worldwide Stock Market Log-Periodic Anti-Bubble Since Mid-2000

Following our previous investigation of the USA Standard and Poor index anti-bubble that started in August 2000, we analyze thirty eight world stock market indices and identify 21 anti-bubble. An ``anti-bubble'' is defined as a self-fulfilling decreasing price created by positive price-to-price feedbacks feeding overall pessimism and negative market sentiment further strengthened by inter-personal interactions. We mathematically characterize anti-bubbles by a power law decrease of the price (or of the logarithm of the price) as a function of time and by decelerating/expanding log-periodic oscillations. The majority of European and Western stock market indices as well as other stock indices exhibit practically the same log-periodic power law anti-bubble structure as found for the USA S&P500 index. These anti-bubbles are found to start approximately at the same time, August 2000, in all these markets. This shows a remarkable degree of synchronization worldwide. The descent of the worldwide stock markets since 2000 is thus an international event, suggesting the strengthening of globalization.

cond-mat.stat-mech↗