Theory of earthquakes interevent times applied to financial markets

Maciej Jagielski, Ryszard Kutner and Didier Sornette

Physica A: Statistical Mechanics and its Applications, 2017, vol. 483, issue C, 68-73

Abstract: We analyze the probability density function (PDF) of waiting times between financial loss exceedances. The empirical PDFs are fitted with the self-excited Hawkes conditional Poisson process with a long power law memory kernel. The Hawkes process is the simplest extension of the Poisson process that takes into account how past events influence the occurrence of future events. By analyzing the empirical data for 15 different financial assets, we show that the formalism of the Hawkes process used for earthquakes can successfully model the PDF of interevent times between successive market losses.

Keywords: Interevent times; Self-excited Hawkes conditional Poisson process; Financial markets (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:483:y:2017:i:c:p:68-73

DOI: 10.1016/j.physa.2017.04.115

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