Dynamical analogy between economical crisis and earthquake dynamics within the nonextensive statistical mechanics framework

Stelios M. Potirakis, Pavlos I. Zitis and Konstantinos Eftaxias

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 13, 2940-2954

Abstract: The field of study of complex systems considers that the dynamics of complex systems are founded on universal principles that may be used to describe a great variety of scientific and technological approaches of different types of natural, artificial, and social systems. Several authors have suggested that earthquake dynamics and the dynamics of economic (financial) systems can be analyzed within similar mathematical frameworks. We apply concepts of the nonextensive statistical physics, on time-series data of observable manifestations of the underlying complex processes ending up with these different extreme events, in order to support the suggestion that a dynamical analogy exists between a financial crisis (in the form of share or index price collapse) and a single earthquake. We also investigate the existence of such an analogy by means of scale-free statistics (the Gutenberg–Richter distribution of event sizes). We show that the populations of: (i) fracto-electromagnetic events rooted in the activation of a single fault, emerging prior to a significant earthquake, (ii) the trade volume events of different shares/economic indices, prior to a collapse, and (iii) the price fluctuation (considered as the difference of maximum minus minimum price within a day) events of different shares/economic indices, prior to a collapse, follow both the traditional Gutenberg–Richter law as well as a nonextensive model for earthquake dynamics, with similar parameter values. The obtained results imply the existence of a dynamic analogy between earthquakes and economic crises, which moreover follow the dynamics of seizures, magnetic storms and solar flares.

Keywords: Nonextensivity; Complex system dynamics; Economic crises; Pre-seismic electromagnetic emissions (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437113002094
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:
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:392:y:2013:i:13:p:2940-2954

DOI: 10.1016/j.physa.2013.03.006

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 ().