Dynamics of a financial market index after a crash

Fabrizio Lillo and Rosario Mantegna

Physica A: Statistical Mechanics and its Applications, 2004, vol. 338, issue 1, 125-134

Abstract: We discuss the statistical properties of index returns in a financial market just after a major market crash. The observed non-stationary behavior of index returns is characterized in terms of the exceedances over a given threshold. This characterization is analogous to the Omori law originally observed in geophysics. By performing numerical simulations and theoretical modelling, we show that the non-linear behavior observed in real market crashes cannot be described by a GARCH(1,1) model. We also show that the time evolution of the Value at Risk observed just after a major crash is described by a power-law function lacking a typical scale.

Keywords: Econophysics; Financial markets; Crashes; Value at Risk (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (13)

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Working Paper: Dynamics of a financial market index after a crash (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:338:y:2004:i:1:p:125-134

DOI: 10.1016/j.physa.2004.02.034

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