Predictability of large future changes in major financial indices

International Journal of Forecasting

Volumn 22, Issue 1, 2006, Pages 153-168

  Sornette, Didier ^a,b,c   Zhou, Wei Xing ^a  

^a EAST CHINA UNIVERSITY OF SCIENCE AND TECHNOLOGY   (China)

^b UNIVERSITY OF CALIFORNIA   (United States)

^c UNIVERSITÉ CÔTE D'AZUR   (France)

Author keywords

Criticality; Econophysics; Log periodicity; Multiscale analysis; Pattern recognition; Predictability

Indexed keywords

EID: 31744448317     PISSN: 01692070     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.ijforecast.2005.02.004     Document Type: Article

References (56)

1. P.W. Anderson K.J. Arrow D. Pines The economy as an evolving complex system 1988 Addison-Wesley New York
2. P. Bak How nature works 1996 Copernicus New York
3. O.J. Blanchard M.W. Watson Bubbles, rational expectations and speculative markets P. Wachtel Crisis in economic and financial structure: Bubbles, bursts, and shocks 1982 Lexington Books Lexington
4. H.-C. Bothmer C. Meister Predicting critical crashes? A new restriction for the free variables Physica A 320 2003 539-547
5. W.A. Brock Pathways to randomness in the economy: Emergent nonlinearity and chaos in economics and finance Estudios Económicos 8 1993 3-55
6. W.A. Brock Whither nonlinear? Journal of Economic Dynamics and Control 24 2000 663-678
7. W.A. Brock C.H. Hommes A rational route to randomness Econometrica 65 1997 1059-1095
8. W.A. Brock C.H. Hommes Heterogeneous beliefs and routes to chaos in a simple asset pricing model Journal of Economic Dynamics and Control 22 1998 1235-1274
9. E. Callen D. Shapero A theory of social imitation Physics Today 27 1974 23-28
10. Chan, K. C., Cheng, L. T. W., & Lung, P. P. (2003). Implied Volatility and Equity Returns: Impact of Market Microstructure and Cause-Effect Relation. (Working paper).
11. S. Drozdz F. Ruf J. Speth M. Wojcik Imprints of log-periodic self-similarity in the stock market European Physical Journal 10 1999 589-593
12. E.F. Fama Market efficiency, long-term returns, and behavioral finance Journal of Financial Economics 49 1998 283-306
13. Figlewski, S., & Wang, X. (2000). Is the "leverage effect" a leverage effect? (Working paper).
14. R.P. Flood P.M. Garber Speculative bubbles, speculative attacks and policy switching 1994 MIT Press Cambridge
15. I.M. Gelfand S.A. Guberman V.I. Keilis-Borok L. Knopo F. Press E.Y. Ranzman et al. Pattern-recognition applied to earthquake epicenters in California Physics of the Earth and Planetary Interiors 11 1976 227-283
16. J.R. Graham Herding among investment newsletters: Theory and evidence Journal of Finance 54 1999 237-268
17. A. Greenspan Economic volatility, remarks at symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming 2002, August 30
18. R.B. Harriff Chaos and nonlinear dynamics in the financial markets: Theory, evidence, and applications International Journal of Forecasting 13 1 1997 146-147
19. D.A. Hsieh Testing for nonlinear dependence in daily foreign exchange rates Journal of Business 62 1989 339-368
20. D.A. Hsieh Nonlinear dynamics in financial markets: Evidence and implications Financial Analysts Journal 1995, July-August 55-62
21. K. Ide D. Sornette Oscillatory finite-time singularities in finance, population and rupture Physica A 307 2002 63-106
22. A. Johansen Characterization of large price variations in financial markets Physica A 324 2003 157-166
23. A. Johansen D. Sornette Critical ruptures European Physical Journal. B, Condensed Matter Physics 18 2000 163-181
24. A. Johansen D. Sornette Large stock market price drawdowns are outliers Journal of Risk 4 2001 69-110
25. A. Johansen D. Sornette Bubbles and antibubbles in Latin-American, Asian and Western stock markets: An empirical study International Journal of Theoretical and Applied Finance 4 6 2001 853-920
26. Johansen, A., & Sornette, D. (in press). Endogenous versus exogenous crashes in financial markets. In "Contemporary Issues in International Finance" (Nova Science Publishers). (http://arXiv.org/abs/cond-mat/0210509)
27. A. Johansen D. Sornette O. Ledoit Predicting financial crashes using discrete scale invariance Journal of Risk 1 1999 5-32
28. M.A. Kaboudan Chaos and forecasting International Journal of Forecasting 12 2 1996 304-306
29. W.J. Karplus The heavens are falling: The scientific prediction of catastrophes in our time 1992 Plenum Press New York
30. V.I. Keilis-Borok A.A. Soloviev Nonlinear dynamics of the lithosphere and earthquake prediction 2003 Springer Heidelberg
31. A. Krawiecki J.A. Holyst D. Helbing Volatility clustering and scaling for financial time series due to attractor bubbling Physical Review Letters 89 2002 158701
32. D. Lamper S.D. Howison N.F. Johnson Predictability of large future changes in a competitive evolving population Physical Review Letters 88 2002 017902
33. T. Lux Herd behavior, bubbles and crashes Economic Journal 105 1995 881-896
34. V.S. L'vov A. Pomyalov I. Procaccia Outliers, extreme events, and multiscaling Physical Review E 63 2001 056118
35. R. Mansilla Algorithmic complexity of real financial markets Physica A 301 2001 483-492
36. Mishkin, F. S., & White, E. N. (2002). U.S. stock market crashes and their aftermath: Implications for monetary policy. (NBER Working Paper No.8992), www.nber.org/papers/w8992
37. G.M. Molchan Strategies in strong earthquake prediction Physics of the Earth and Planetary Interiors 61 1990 84-98
38. G.M. Molchan Earthquake prediction as a decision-making problem Pure and Applied Geophysics 149 1997 233-247
39. E.W. Montroll W.W. Badger Introduction to Quantitative Aspects of Social Phenomena 1974 Gordon and Breach New York
40. A. Orlean Bayesian interactions and collective dynamics of opinion: Herd behavior and mimetic contagion Journal of Economic Behavior and Organization 28 1995 257-274
41. W. Press S. Teukolsky W. Vetterling B. Flannery Numerical recipes in FORTRAN: The art of scientific computing 1996 Cambridge University Cambridge
42. D.S. Scharfstein J.C. Stein Herd behavior and investment American Economic Review 80 1990 465-479
43. R.J. Shiller Market volatility 1989 MIT Press Cambridge
44. R.J. Shiller Irrational exuberance 2000 Princeton University Press Princeton
45. A. Shmilovici Y. Alon-Brimer S. Hauser Using a stochastic complexity measure to check the efficient market hypothesis Computational Economics 22 2003 273-284
46. D. Sornette Discrete-scale invariance and complex dimensions Physics Reports 297 1998 239-270
47. D. Sornette Predictability of catastrophic events: Material rupture, earthquakes, turbulence, financial crashes, and human birth Proceedings of the National Academy of Sciences of the United States of America 99 2002 2522-2529
48. D. Sornette Why stock markets crash 2003 Princeton University Press Princeton
49. D. Sornette Critical market crashes Physics Reports 378 2003 1-98
50. D. Sornette Critical phenomena in natural sciences (chaos, fractals, self-organization and disorder: Concepts and tools) 2nd ed. 2004 Springer Series in Synergetics Heidelberg
51. D. Sornette A. Johansen Significance of log-periodic precursors to financial crashes Quantitative Finance 1 2001 452-471
52. D. Sornette Y. Malevergne J.-F. Muzy What causes crashes? Risk 16 2003 67-71
53. D. Sornette H. Takayasu W.-X. Zhou Finite-time singularity signature of hyperinflation Physica A 325 2003 492-506
54. D. Sornette W.-X. Zhou The US 2000-2002 market descent: How much longer and deeper? Quantitative Finance 2 2002 468-481
55. W.-X. Zhou D. Sornette Statistical significance of periodicity and log-periodicity with heavy-tailed correlated noise International Journal of Modern Physics C 13 2002 137-169
56. W.-X. Zhou D. Sornette Renormalization group analysis of the 2000-2002 anti-bubble in the US S&P 500 index: Explanation of the hierarchy of five crashes and prediction Physica A 330 2003 584-604