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EVALUATION OF THE QUANTITATIVE PREDICTION OF A TREND REVERSAL ON THE JAPANESE STOCK MARKET IN 1999

Anders Johansen () and Didier Sornette ()
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Anders Johansen: Institute of Geophysics and Planetary Physics, University of California, Los Angeles, California 90095, USA
Didier Sornette: Institute of Geophysics and Planetary Physics, University of California, Los Angeles, California 90095, USA;

International Journal of Modern Physics C (IJMPC), 2000, vol. 11, issue 02, 359-364

Abstract: In January 1999, the authors published a quantitative prediction that the Nikkei index should recover from its 14-year low in January 1999 and reach ≈20 500 a year later. The purpose of the present paper is to evaluate the performance of this specific prediction as well as the underlying model: the forecast, performed at a time when the Nikkei was at its lowest (as we can now judge in hindsight), has correctly captured the change of trend as well as the quantitative evolution of the Nikkei index since its inception. As the change of trend from sluggish to recovery was estimated quite unlikely by many observers at that time, a Bayesian analysis shows that a skeptical (resp. neutral) Bayesian sees prior belief in our model amplified into a posterior belief 19 times larger (resp. reach the 95% level).

Keywords: Stock Market; Log-Periodic Oscillations; Scale Invariance; Prediction; Gold; Nikkei; Herding Behavior (search for similar items in EconPapers)
Date: 2000
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