Diagnosis and Prediction of IIGPS’ Countries Bubble Crashes during BREXIT

Bikramaditya Ghosh, Spyros Papathanasiou, Nikita Ramchandani and Dimitris Kenourgios
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Bikramaditya Ghosh: RV Institute of Management, Bangalore 560041, India
Nikita Ramchandani: Christ University, Bangalore 560029, India

Mathematics, 2021, vol. 9, issue 9, 1-14

Abstract: We herein employ an alternative approach to model the financial bubbles prior to crashes and fit a log-periodic power law (LPPL) to IIGPS countries (Italy, Ireland, Greece, Portugal, and Spain) during Brexit. These countries represent the five financially troubled economies of the Eurozone that have suffered the most during the Brexit referendum. It was found that all 77 crashes across the five IIGPS nations from 19 January 2015 until 17 February 2020 strictly followed a log-periodic power law or other LPPL signature. They all had a speculative bubble phase (following the power law growth) that was then followed by a sudden crash immediately after reaching a critical point. Furthermore, their pattern coefficients were similar as well. This study would surely assist policymakers around the Eurozone to predict future crashes with the help of these parameters.

Keywords: financial bubbles; market crashes; log-periodic power law; IIGPS’ countries (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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