Log-periodic self-similarity: an emerging financial law?

S. Drożdż, F. Grümmer, F. Ruf and J. Speth

Physica A: Statistical Mechanics and its Applications, 2003, vol. 324, issue 1, 174-182

Abstract: A hypothesis that the financial log-periodicity, cascading self-similarly through various time scales, carries signatures of a law is pursued. It is shown that the most significant historical financial events can be classified amazingly well using a single and unique value of the preferred scaling factor λ=2, which indicates that its real value should be close to this number. This applies even to a declining decelerating log-periodic phase. Crucial in this connection is identification of a “super-bubble” (bubble on bubble) phenomenon. Identifying a potential “universal” preferred scaling factor, as undertaken here, may significantly improve the predictive power of the corresponding methodology. Several more specific related results include evidence that: (i)the real end of the high technology bubble on the stock market started (with a decelerating log-periodic draw down) in the beginning of September 2000;(ii)a parallel 2000–2002 decline seen in the Standard & Poor's 500 from the log-periodic perspective is already of the same significance as the one of the early 1930s and of the late 1970s;(iii)all this points to a much more serious global crash in around 2025, of course from a level much higher (at least one order of magnitude) than in 2000.

Keywords: Complex systems; Financial markets; Fundamental laws of nature (search for similar items in EconPapers)
Date: 2003
References: View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:324:y:2003:i:1:p:174-182

DOI: 10.1016/S0378-4371(02)01848-4

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