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The British Pound on Brexit night : a natural experiment of market efficiency and real-time predictability

Wu, Ke; Wheatley, Spencer; Sornette, Didier - 2017

Exploiting the near-experimental conditions provided by the British Pound market in US Dollars during the Brexit vote of June 23rd, 2016, we unearth a major challenge to the Efficient Market Hypothesis. With a single factor of prior polling information, we show that the Brexit result could have...

Persistent link: https://www.econbiz.de/10011761226

Super-exponential RE bubble model with efficient crashes

Kreuser, Jerome; Sornette, Didier - 2017

We propose a dynamic Rational Expectations (RE) bubble model of prices with the intention to exploit it for and evaluate it on optimal investment strategies. Our bubble model is defined as a geometric Brownian motion combined with separate crash (and rally) discrete jump distributions associated...

Persistent link: https://www.econbiz.de/10011865575

Inefficient bubbles and efficient drawdowns in financial markets

Schatz, Michael; Sornette, Didier - 2018

At odds with the common “rational expectations” framework for bubbles, economists like Hyman Minsky, Charles Kindleberger and Robert Shiller have documented that irrational behavior, ambiguous information or certain limits to arbitrage are essential drivers for bubble phenomena and financial...

Persistent link: https://www.econbiz.de/10011900246

Super-exponential growth expectations and the global financial crisis

Leiss, Matthias; Nax, Heinrich H.; Sornette, Didier - 2014

We construct risk-neutral return probability distributions from S&P 500 options data over the decade 2003 to 2013, separable into pre-crisis, crisis and post-crisis regimes. The pre-crisis period is characterized by increasing realized and, especially, option-implied returns. This translates...

Persistent link: https://www.econbiz.de/10010443041

Follow the money : the monetary roots of bubbles and crashes

Corsi, Fulvio; Sornette, Didier - 2011

We propose a reduced form model for the Minskian dynamics of liquidity and of asset prices in terms of the so-called financial accelerator mechanism. In a nutshell, credit creation is driven by the market value of the financial assets employed as collateral in the bank loans. This leads to a...

Persistent link: https://www.econbiz.de/10009561751

Bubble diagnosis and prediction of the 2005 - 2007 and 2008 - 2009 Chinese stock market bubbles

Jiang, Zhi-Qiang; Zhou, Wei-Xing; Sornette, Didier; … - 2009

By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding of investors and traders and (iii) the mathematical and statistical physics of bifurcations and phase transitions, the logperiodic power law (LPPL) model has been developed as a...

Persistent link: https://www.econbiz.de/10003971111

A model of financial bubbles and drawdowns with non-local behavioral self-referencing

Malevergne, Yannick; Sornette, Didier; Wei, Ran - 2021

We propose a novel class of models in which the crash hazard rate is determined by a function of a non-local estimation … of mispricing. Rooted in behavioral finance, the non-local estimation embodies in particular the characteristic of … series because they assume that crashes occur in a single large negative jump, which is counterfactual. The model estimation …

Persistent link: https://www.econbiz.de/10012800780

Statistical testing of DeMark technical indicators on commodity futures

Lissandrin, Marco; Daly, Donnacha; Sornette, Didier - 2015 - This version: July 2016

In this paper, we examine the performance of three DeMark indicators (Sequential, Combo and Setup trend), which constitute specific implementations of technical analysis often used by practitioners, over twenty-one commodity futures markets and ten years of daily data. Our work addresses price...

Persistent link: https://www.econbiz.de/10011507782

Symmetric thermal optimal path and time-dependent lead-lag relationship : novel statistical tests and application to UK and US real-estate and monetary policies

Meng, Hao; Zhou, Wei-Xing; Sornette, Didier - 2014

We present the symmetric thermal optimal path (TOPS) method to determine the time-dependent lead-lag relationship between two stochastic time series. This novel version of the previously introduced TOP method alleviates some inconsistencies by imposing that the lead-lag relationship should be...

Persistent link: https://www.econbiz.de/10010442989

Rational belief bubbles

Sohn, Hyun-U; Sornette, Didier - 2020

We propose an extension of the class of rational expectations bubbles (REBs) to the more general rational beliefs setting of Kurz (1994a,b). In a potentially non-stationary but stationarizable environment, among an heterogenous population of agents, it is possible to hold more than one...

Persistent link: https://www.econbiz.de/10012181099