The Nasdaq crash of April 2000: Yet another example of log-periodicity in a speculative bubble ending in a crash

We clarify the status of log-periodicity associated with speculative bubbles preceding financial crashes. In particular, we address Feigenbaum's [2001] criticism and show how it can be rebuked. Feigenbaum's main result is as follows: ``the hypothesis that the log-periodic component is present in the data cannot be rejected at the 95% confidence level when using all the data prior to the 1987 crash; however, it can be rejected by removing the last year of data.'' (e.g., by rem...

This paper presents an exclusive classification of the largest crashes in Dow Jones Industrial Average (DJIA), SP500 and NASDAQ in the past century. Crashes are objectively defined as the top-rank filtered drawdowns (loss from the last local maximum to the next local minimum disregarding noise fluctuations), where the size of the filter is determined by the historical volatility of the index. It is shown that {\it all} crashes can be linked to either an external shock, {\it e...

In this paper, I revisit Phillips, Wu and Yu's seminal 2011 paper on testing for the dot-com bubble. I apply recent advancements of their methods to individual Nasdaq stocks and use a novel specification for fundamentals. To address a divide in the literature, I generate a detailed sectoral breakdown of the dot-com bubble. I find that it comprised multiple overlapping episodes of exuberance and that there were indeed two starting dates for internet exuberance.

We respond to Sornette and Johansen's criticisms of our findings regarding log-periodic precursors to financial crashes. Included in this paper are discussions of the Sornette-Johansen theoretical paradigm, traditional methods of identifying log-periodic precursors, the behavior of the first differences of a log-periodic price series, and the distribution of drawdowns for a securities price.

Twenty-two significant bubbles followed by large crashes or by severe corrections in the Argentinian, Brazilian, Chilean, Mexican, Peruvian, Venezuelan, Hong-Kong, Indonesian, Korean, Malaysian, Philippine and Thai stock markets indices are identified and analysed for log-periodic signatures decorating an average power law acceleration. We find that log-periodic power laws adequately describe speculative bubbles on these emerging markets with very few exceptions and thus exte...

Previous analyses of a large ensemble of stock markets have demonstrated that a log-periodic power law (LPPL) behavior of the prices constitutes a qualifying signature of speculative bubbles that often land with a crash. We detect such a LPPL signature in the foreign capital inflow during the bubble on the US markets culminating in March 2000. We detect a weak synchronization and lag with the NASDAQ 100 LPPL pattern. We propose to rationalize these observations by the existen...

Motivated by the hypothesis that financial crashes are macroscopic examples of critical phenomena associated with a discrete scaling symmetry, we reconsider the evidence of log-periodic precursors to financial crashes and test the prediction that log-periodic oscillations in a financial index are embedded in the mean function of this index. In particular, we examine the first differences of the logarithm of the S&P 500 prior to the October 87 crash and find the log-periodic c...

Using a recently introduced rational expectation model of bubbles, based on the interplay between stochasticity and positive feedbacks of prices on returns and volatility, we develop a new methodology to test how this model classifies 9 time series that have been previously considered as bubbles ending in crashes. The model predicts the existence of two anomalous behaviors occurring simultaneously: (i) super-exponential price growth and (ii) volatility growth, that we refer t...

In this paper, we quantitatively investigate the properties of a statistical ensemble of stock prices. We focus attention on the relative price defined as $ X(t) = S(t)/S(0) $, where $ S(0) $ is the initial price. We selected approximately 3200 stocks traded on the Japanese Stock Exchange and formed a statistical ensemble of daily relative prices for each trading day in the 3-year period from January 4, 1999 to December 28, 2001, corresponding to the period in which the {\it ...

We tested 45 indices and common stocks traded in the South African stock market for the possible existence of a bubble over the period from Jan. 2003 to May 2006. A bubble is defined by a faster-than-exponential acceleration with significant log-periodic oscillations. The faster-than-exponential acceleration characteristics are tested with several different metrics, including nonlinearity on the logarithm of the price and power law fits. The log-periodic properties are invest...