Didier Sornette
- Published in print:
- 2017
- Published Online:
- May 2018
- ISBN:
- 9780691175959
- eISBN:
- 9781400885091
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691175959.003.0007
- Subject:
- Business and Management, Finance, Accounting, and Banking
This chapter examines the universal nature of the critical log-periodic precursory signature of stock market crashes. It considers the crash of October 1987 and of October 1929; the Hong Kong crashes ...
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This chapter examines the universal nature of the critical log-periodic precursory signature of stock market crashes. It considers the crash of October 1987 and of October 1929; the Hong Kong crashes of 1987, 1994, and 1997; the crash of October 1997 and its resonance on the U.S. market; currency crashes; and the crash of August 1998. It also discusses a nonparametric test of log-periodicity, the slow crash of 1962 ending the so-called “tronics boom,” and the Nasdaq crash of April 2000. Finally, it looks at “antibubbles,” taking into account the “bearish” regime on the Nikkei starting from January 1, 1990, the price of gold after the burst of the bubble in 1980. The chapter shows that large stock market crashes are analogous to critical points studied in the statistical physics community in relation to magnetism, melting, and similar phenomena.Less
This chapter examines the universal nature of the critical log-periodic precursory signature of stock market crashes. It considers the crash of October 1987 and of October 1929; the Hong Kong crashes of 1987, 1994, and 1997; the crash of October 1997 and its resonance on the U.S. market; currency crashes; and the crash of August 1998. It also discusses a nonparametric test of log-periodicity, the slow crash of 1962 ending the so-called “tronics boom,” and the Nasdaq crash of April 2000. Finally, it looks at “antibubbles,” taking into account the “bearish” regime on the Nikkei starting from January 1, 1990, the price of gold after the burst of the bubble in 1980. The chapter shows that large stock market crashes are analogous to critical points studied in the statistical physics community in relation to magnetism, melting, and similar phenomena.
Luis A. V. Catão
- Published in print:
- 2007
- Published Online:
- February 2013
- ISBN:
- 9780226185002
- eISBN:
- 9780226185033
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226185033.003.0008
- Subject:
- Economics and Finance, International
This chapter describes the historical evidence on sudden stops (SSs) using a new international data set on capital inflows spanning sixteen countries since the early days of financial globalization, ...
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This chapter describes the historical evidence on sudden stops (SSs) using a new international data set on capital inflows spanning sixteen countries since the early days of financial globalization, around 1870—when asset market arbitrage was greatly spurred by the advent of the transatlantic telegraph in 1866. Two key features that underpin the current relevance of this period are the high degree of integration of world capital markets and the widespread use of bond financing as the main instrument of sovereign borrowing—two clear similarities with its late twentieth-century/early twenty-first century counterpart. The chapter also establishes the links between SSs and currency crashes. One feature of the pre-World War I period, which makes it especially interesting to look at this relationship, is the existence of an international monetary system that provided a key incentive for countries to peg their currencies to gold and thus forestall devaluations or depreciations.Less
This chapter describes the historical evidence on sudden stops (SSs) using a new international data set on capital inflows spanning sixteen countries since the early days of financial globalization, around 1870—when asset market arbitrage was greatly spurred by the advent of the transatlantic telegraph in 1866. Two key features that underpin the current relevance of this period are the high degree of integration of world capital markets and the widespread use of bond financing as the main instrument of sovereign borrowing—two clear similarities with its late twentieth-century/early twenty-first century counterpart. The chapter also establishes the links between SSs and currency crashes. One feature of the pre-World War I period, which makes it especially interesting to look at this relationship, is the existence of an international monetary system that provided a key incentive for countries to peg their currencies to gold and thus forestall devaluations or depreciations.
