https://doi.org/10.1007/s100510050163
Stock market crashes are outliers
1
CATS, Niels Bohr Institute, Blegdamsvej 17, DK-2100,
Denmark
2
Department of Earth and Space Science, and Institute of Geophysics and
Planetary Physics, University of California, Los Angeles, California
90095, USA
3
Laboratoire de Physique de la Matière Condensée (CNRS UMR6622) ,
Université de Nice-Sophia Antipolis, B.P. 71, Parc Valrose, 06108
Nice Cedex 2, France
Corresponding author: a sornette@naxos.unice.fr
Revised:
30
November
1997
Accepted:
8
December
1997
Published online: 15 January 1998
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.+m – Science and society / 02.50.-r – Probability theory, stochastic processes, and statistics / 89.90.+n – Other areas of general interest to physicists
© EDP Sciences, Società Italiana di Fisica, Springer-Verlag, 1998
