Bubble, critical zone and the crash of Royal Ahold

Gerrit Broekstra, Didier Sornette and Wei-Xing Zhou

Physica A: Statistical Mechanics and its Applications, 2005, vol. 346, issue 3, 529-560

Abstract: We find that the seed of the 2002/03 crisis of the Dutch supermarket giant AHOLD was planted in 1996. We have adapted Weidlich's theory of opinion formation to describe the formation of buy or sell decisions among investors, based on a competition between the mechanisms of herding and of personal opinion opposing the herd. Using our identification of a “critical zone” starting in mid-1997 describing the maturation of a systemic instability forewarning of an inevitable crash fueled by raising expectations of investors to maintain strong herding pressures, our study opens the possibility of developing early warning signals but also suggests to top management ways of dealing with the coming crisis.

Keywords: Econophysics; Sociodynamics; Bubble; Critical zone; Crash; Synergetics (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437104011082
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
Working Paper: Bubble, Critical Zone and the Crash of Royal Ahold (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:346:y:2005:i:3:p:529-560

DOI: 10.1016/j.physa.2004.08.021

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().