Visualizing the log-periodic pattern before crashes

N. Vandewalle; M. Ausloos; Ph. Boveroux; A. Minguet

doi:10.1007/s100510050775

EPJ

Visualizing the log-periodic pattern before crashes

N. Vandewalle¹, M. Ausloos¹, Ph. Boveroux² and A. Minguet²

¹ Institut de Physique B5, Université de Liège, 4000 Liège, Belgium
² Théorie monétaire et finances B31, Faculté d'Économie, Gestion et Sciences Sociales, Université de Liège, 4000 Liège, Belgium

Received: 15 October 1998
Revised: 19 November 1998
Published online: 15 May 1999

Abstract

We present a method for visualizing the pattern which we believe to be a precursor signature of financial crashes (or ruptures). The log-periodicity of the pattern is investigated through the envelope function technique. Three periods of the Dow Jones Industrial Average (DJIA) are investigated: 1982-1987, 1992-1997 and 1993-1998. The presence of a rupture in the end of 1998 is outlined from data taken before the end of August 1998.

PACS: 05.40.-a – Fluctuation phenomena, random processes, noise, and Brownian motion / 47.53.+n – Fractals