Imprints of log-periodic self-similarity in the stock market

  • S. Drozdz
  • F. Ruf
  • J. Speth
  • M. Wójcik
Article

DOI: 10.1007/s100510050890

Cite this article as:
Drozdz, S., Ruf, F., Speth, J. et al. Eur. Phys. J. B (1999) 10: 589. doi:10.1007/s100510050890

Abstract:

Detailed analysis of the log-periodic structures as precursors of the financial crashes is presented. The study is mainly based on the German Stock Index (DAX) variation over the 1998 period which includes both, a spectacular boom and a large decline, in magnitude only comparable to the so-called Black Monday of October 1987. The present example provides further arguments in favour of a discrete scale-invariance governing the dynamics of the stock market. A related clear log-periodic structure prior to the crash and consistent with its onset extends over the period of a few months. Furthermore, on smaller time-scales the data seems to indicate the appearance of analogous log-periodic oscillations as precursors of the smaller, intermediate decreases. Even the frequencies of such oscillations are similar on various levels of resolution. The related value \(\lambda \approx 2\) of preferred scaling ratios is amazingly consistent with those found for a wide variety of other complex systems. Similar analysis of the major American indices between September 1998 and February 1999 also provides some evidence supporting this concept but, at the same time, illustrates a possible splitting of the dynamics that a large market may experience.

PACS. 01.75.+m Science and society 05.40.-a Fluctuation phenomena, random processes, and Brownian motion 89.90.+n Other topics of general interest to physicists 

Copyright information

© EDP Sciences, Springer-Verlag 1999

Authors and Affiliations

  • S. Drozdz
    • 1
  • F. Ruf
    • 3
  • J. Speth
    • 1
  • M. Wójcik
    • 1
  1. 1.Institut für KernphysikForschungszentrum JülichJülichGermany
  2. 2.Institute of Nuclear PhysicsKrakówPoland
  3. 3.WestLB International S.A.,32-34 boulevard Grande-Duchesse CharlotteLuxembourg

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