Predicting trend reversals using market instantaneous state

Thomas Bury

Physica A: Statistical Mechanics and its Applications, 2014, vol. 404, issue C, 79-91

Abstract: Collective behaviors taking place in financial markets reveal strongly correlated states especially during a crisis period. A natural hypothesis is that trend reversals are also driven by mutual influences between the different stock exchanges. Using a maximum entropy approach, we find coordinated behavior during trend reversals dominated by the pairwise component. In particular, these events are predicted with high significant accuracy by the ensemble’s instantaneous state.

Keywords: Market microstructure; Pairwise interactions; Collective phenomena; Trend reversals; Order–disorder; Financial network (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:404:y:2014:i:c:p:79-91

DOI: 10.1016/j.physa.2014.02.044

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