Analysis of the Lehman Brothers collapse and the Flash Crash event by applying wavelets methodologies

Maria P. Beccar-Varela, Maria C. Mariani, Osei K. Tweneboah and Ionut Florescu

Physica A: Statistical Mechanics and its Applications, 2017, vol. 474, issue C, 162-171

Abstract: In this study, we apply a wavelet methodology initially developed for geophysical data to financial data. Specifically, the method distinguishes between natural tectonic earthquakes and man made explosions. We exemplify using time series data from two financial events: the Lehman Brothers collapse and the Flash Crash event. We conclude that the Lehman Brothers collapse behaves like a natural earthquake while the Flash Crash event behaves like a human made explosion. This study may imply that the Lehman Brothers type events may be predicted, while sudden Flash Crash type events are not predictable.

Keywords: Wavelets methodology; High frequency financial data; Lehman Brothers collapse; Flash Crash event (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:474:y:2017:i:c:p:162-171

DOI: 10.1016/j.physa.2017.01.064

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