Determining bottom price-levels after a speculative peak
LPTHE, University Paris 7, 2 place Jussieu, 75005 Paris, France
Published online: 15 September 2000
During a stock market peak the price of a given stock ( i ) jumps from an initial level to a peak level before falling back to a bottom level . The ratios and 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.
PACS: 64.60.Fr – Equilibrium properties near critical points, critical exponents / 87.23.Ge – Dynamics of social systems
© EDP Sciences, Società Italiana di Fisica, Springer-Verlag, 2000