Hierarchies, Complex Fractal Dimensions, and Log-Periodicity
Hierarchies, Complex Fractal Dimensions, and Log-Periodicity
This chapter describes the concept of fractals and their self-similarity, including fractals with complex dimensions. It shows how these geometric and mathematical objects enable one to codify the information contained in the precursory patterns before large stock market crashes. The chapter first considers how models of cooperative behaviors resulting from imitation between agents organized within a hierarchical structure exhibit the announced critical phenomena decorated with “log-periodicity.” It then examines the underlying hierarchical structure of social networks, critical behavior in hierarchical networks, a hierarchical model of financial bubbles, and discrete scale invariance. It also discusses a technique, called the “renormalization group,” and a simple model exhibiting a finite-time singularity due to a positive feedback induced by trend following investment strategies. Finally, it looks at scenarios leading to discrete scale invariance and log-periodicity.
Keywords: fractals, self-similarity, imitation, log-periodicity, social network, bubble, discrete scale invariance, renormalization group, finite-time singularity, positive feedback
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