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Stock market crashes, precursors and replicas

Author

Listed:
  • Didier Sornette

    (UCLA
    Science & Finance, Capital Fund Management)

  • Anders Johansen
  • Jean-Philippe Bouchaud

    (Science & Finance, Capital Fund Management
    CEA Saclay;)

Abstract

We present an analysis of the time behavior of the S&P 500 (Standard and Poors) New York stock exchange index before and after the October 1987 market crash and identify precursory patterns as well as aftershock signatures and characteristic oscillations of relaxation. Combined, they all suggest a picture of a kind of dynamical critical point, with characteristic log-periodic signatures, similar to what has been found recently for earthquakes. These observations are confirmed on other smaller crashes, and strengthen the view of the stockmarket as an example of a self-organizing cooperative system.

Suggested Citation

  • Didier Sornette & Anders Johansen & Jean-Philippe Bouchaud, 1995. "Stock market crashes, precursors and replicas," Science & Finance (CFM) working paper archive 500018, Science & Finance, Capital Fund Management.
    • Handle: RePEc:sfi:sfiwpa:500018
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    Cited by:

    1. Shu-Peng Chen & Ling-Yun He, 2013. "Bubble Formation and Heterogeneity of Traders: A Multi-Agent Perspective," Computational Economics, Springer;Society for Computational Economics, vol. 42(3), pages 267-289, October.
    2. Jovanovic, Franck & Schinckus, Christophe, 2017. "Econophysics and Financial Economics: An Emerging Dialogue," OUP Catalogue, Oxford University Press, number 9780190205034.

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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