Exogenous and endogenous crashes as phase transitions in complex financial systems

John Fry

MPRA Paper from University Library of Munich, Germany

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 external 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.

Keywords: Exogenous; Endogenous; Financial Crashes; Bubbles; Econophysics (search for similar items in EconPapers)
JEL-codes: C00 C53 G32 (search for similar items in EconPapers)
Date: 2012-01-26
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Citations: View citations in EconPapers (10)

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