Stock market crashes are outliers

  • A. Johansen
  • D. Sornette
Rapid Note

Abstract:

We call attention against what seems to be a widely held misconception according to which large crashes are the largest events of distributions of price variations with fat tails. We demonstrate on the Dow Jones Industrial Average that with high probability the three largest crashes in this century are outliers. This result supports the suggestion that large crashes result from specific amplification processes that might lead to observable pre-cursory signatures.

PACS. 01.75.+mScience and society[:AND:]02.50.-rProbability theory, stochastic processes, and statistics - 89.90.+nOther areas of general interest to physicists 

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Copyright information

© EDP Sciences, Springer-Verlag 1998

Authors and Affiliations

  • A. Johansen
    • 1
  • D. Sornette
    • 2
  1. 1.CATS, Niels Bohr InstituteBlegdamsvej 17Denmark
  2. 2.Department of Earth and Space Science, and Institute of Geophysics and Planetary PhysicsUniversity of CaliforniaLos AngelesUSA
  3. 3.Laboratoire de Physique de la Matière Condensée (CNRS UMR6622)Université de Nice-Sophia AntipolisNice Cedex 2France

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