Endogenous versus Exogenous Crashes in Finan ial Markets

Endogenous versus Exogenous Crashes in Financial Markets

In a series of papers based on analogies with statistical physics models, we have proposed that most financial crashes are the climax of so-called log-periodic power law signatures (LPPS) associated with speculative bubbles [Sornette and Johansen, 1998, Johansen and Sornette, 1999, Johansen et al., 1999, Johansen et al., 1999, Sornette and Johansen, 2001]. In addition, a large body of empirical...

The Generalized Hyperboli Model : Finan ial Derivatives and Risk

Endogenous versus exogenous origins of financial rallies and crashes in an agent-based model with Bayesian learning and imitation

We present a simple agent-based model to study how the proximate triggering factor of a crash or a rally might relate to its fundamental mechanism, and vice versa. Our agents form opinions and invest, based on three sources of information, (i) public information, i.e. news, (ii) information from their “friendship” network, promoting imitation and (iii) private information. Agents use Bayesian l...

A Re - examination of Stanton ' s Di usion Estimationswith Appli ations to Finan ial Model Validation

Using recurrence plot analysis to distinguish between endogenous and exogenous stock market crashes

Recurrence Plots are graphical tools based on Phase Space Reconstruction. Recurrence Quantification Analysis (RQA) is a statistical quantification of RPs. RP and RQA are good at working with non-stationarity and noisy data, in detecting changes in data behavior, in particular in detecting breaks, like a phase transition and in informing about other dynamic properties of a time series. Endogenou...