Exogenous and endogenous market crashes as phase transitions in complex financial systems

John Fry

The European Physical Journal B: Condensed Matter and Complex Systems, 2012, vol. 85, issue 12, 1-6

Abstract: In this paper we provide a unifying framework for a set of seemingly disparate models for exogenous and endogenous shocks in complex financial systems. Markets operate by balancing intrinsic levels of risk and return. This remains true even in the midst of transitory exogenous and endogenous shocks. Changes in market regime (bearish to bullish and bullish to bearish) can be explicitly shown to represent a phase transition from random to deterministic behaviour in prices. The resulting models refine the empirical analysis in a number of previous papers. Copyright EDP Sciences, SIF, Springer-Verlag Berlin Heidelberg 2012

Keywords: Statistical and Nonlinear Physics (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1140/epjb/e2012-30234-8

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