Abstract:
During a stock market peak the price of a given stock (i) jumps from an initial level p 1(i) to a peak level p 2(i) before falling back to a bottom level p 3(i). The ratios A(i) = p 2(i)/p 1(i) and B(i)= p 3(i)/p 1(i) are referred to as the peak- and bottom-amplitude respectively. The paper shows that for a sample of stocks there is a linear relationship between A(i) and B(i) of the form: B=0.4A+b. In words, this means that the higher the price of a stock climbs during a bull market the better it resists during the subsequent bear market. That rule, which we call the resilience pattern, also applies to other speculative markets. It provides a useful guiding line for Monte Carlo simulations.
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Received 9 June 2000
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Roehner, B. Determining bottom price-levels after a speculative peak. Eur. Phys. J. B 17, 341–345 (2000). https://doi.org/10.1007/s100510070150
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DOI: https://doi.org/10.1007/s100510070150