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Why Stock Markets CrashCritical Events in Complex Financial Systems$
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Didier Sornette

Print publication date: 2017

Print ISBN-13: 9780691175959

Published to Princeton Scholarship Online: May 2018

DOI: 10.23943/princeton/9780691175959.001.0001

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Autopsy of Major Crashes: Universal Exponents and Log-Periodicity

Autopsy of Major Crashes: Universal Exponents and Log-Periodicity

(p.228) Chapter 7 Autopsy of Major Crashes: Universal Exponents and Log-Periodicity
Why Stock Markets Crash

Didier Sornette

Princeton University Press

This chapter examines the universal nature of the critical log-periodic precursory signature of stock market crashes. It considers the crash of October 1987 and of October 1929; the Hong Kong crashes of 1987, 1994, and 1997; the crash of October 1997 and its resonance on the U.S. market; currency crashes; and the crash of August 1998. It also discusses a nonparametric test of log-periodicity, the slow crash of 1962 ending the so-called “tronics boom,” and the Nasdaq crash of April 2000. Finally, it looks at “antibubbles,” taking into account the “bearish” regime on the Nikkei starting from January 1, 1990, the price of gold after the burst of the bubble in 1980. The chapter shows that large stock market crashes are analogous to critical points studied in the statistical physics community in relation to magnetism, melting, and similar phenomena.

Keywords:   stock market crash, Hong Kong, currency crash, log-periodicity, tronics boom, Nasdaq, antibubble, Nikkei, gold, bubble

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