Why Stock Markets Crash¶
Sornette, D. (2003). Why Stock Markets Crash: Critical Events in Complex Financial Systems. Princeton University Press.
Cited by¶
4 citations across 4 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Criticality
- Finance & economics: market crashes modeled as critical transitions; herding behavior near information cascades; bubble formation and bursting as approaches to critical points, a research program Sornette (2003) developed at length in his treatment of stock-market crashes as critical phenomena.
This sourceDevelops financial crashes as critical phenomena: applies critical-point divergences, log-periodic precursors, and cooperative speculation to historical bubbles from tulip mania to the 1929 and 1987 crashes.
- Finance & economics: market crashes modeled as critical transitions; herding behavior near information cascades; bubble formation and bursting as approaches to critical points, a research program Sornette (2003) developed at length in his treatment of stock-market crashes as critical phenomena.
- Dragon King Theory
- Plot the largest historical crashes (1929, 1987, 2008) and they sit above the extrapolated tail line: the worst drawdowns are larger than even the fat-tailed body predicts, forming a separated outlier cluster — the distribution is bimodal at its top.
This sourceModels crashes as the endpoint of imitative-herding positive feedback driving prices to a finite-time singularity. (Print monograph, ISBN 0-691-09630-9.)
- Plot the largest historical crashes (1929, 1987, 2008) and they sit above the extrapolated tail line: the worst drawdowns are larger than even the fat-tailed body predicts, forming a separated outlier cluster — the distribution is bimodal at its top.
- Punctuated Equilibrium
- The geophysical stick-slip stress-release pattern is structurally identical to the build-up-and-crash dynamic of speculative bubbles and credit cycles, both carrying power-law energy distributions.
This sourceTreats speculative-bubble build-up-and-crash dynamics with power-law / critical signatures, structurally paralleling geophysical stress release.
- The geophysical stick-slip stress-release pattern is structurally identical to the build-up-and-crash dynamic of speculative bubbles and credit cycles, both carrying power-law energy distributions.
- Tipping Points (or Phase Transitions)
- Market regime shifts have been studied via bifurcation analysis and are now monitored via variance-spike indicators.
This sourceDevelops financial crashes as critical phenomena: applies the formalism of critical-point divergences, log-periodic precursors, and cooperative speculation to historical bubbles from tulip mania to the 1987 and 1929 crashes.
- Market regime shifts have been studied via bifurcation analysis and are now monitored via variance-spike indicators.
Verification¶
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