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

Comment on recent claims by Sornette and Zhou: D. Sornette and W. Zhou, Quantitative Finance 2 (6), 468-481 (2002); Evidence of a Worldwide Stock Market Log-Periodic Anti-Bubble Since Mid-2000, cond-mat/0212010; Renormalization Group Analysis of the 2000-2002 anti-bubble in the US SP 500 index, physics/0301023

Since August 2000, the stock market in the USA as well as most other western markets have depreciated almost in synchrony according to complex patterns of drops and local rebounds. In \cite{SZ02QF}, we have proposed to describe this phenomenon using the concept of a log-periodic power law (LPPL) antibubble, characterizing behavioral herding between investors leading to a competition between positive and negative feedbacks in the pricing process. A monthly prediction for the f...

We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset prices away from their fundamental value. This growth makes the system increasingly susceptible to any exogenous shock, thus eventually precipitating a crash. We also present computer experiments which in their aggregate behavior confirm th...

The aim of this paper is to compare statistical properties of a bubble period with those of the anti-bubble period in stock markets. We investigate the statistical properties of daily data for the Nikkei 225 index in the 28-year period from January 1975 to April 2003, corresponded to the periods of bubbles and anti-bubbles. We divide the time series into two parts, the period of {\it inflation (or bubbles)} from January 1975 to December 2002 and the period of {\it deflation (...

Evidence is offered for log-periodic (in time) fluctuations in the S&P 500 stock index during the three years prior to the October 27, 1997 "correction". These fluctuations were expected on the basis of a discretely scale invariant rupture phenomenology of stock market crashes proposed earlier.

Applicability of the concept of financial log-periodicity is discussed and encouragingly verified for various phases of the world stock markets development in the period 2000-2010. In particular, a speculative forecasting scenario designed in the end of 2004, that properly predicted the world stock market increases in 2007, is updated by setting some more precise constraints on the time of duration of the present long-term equity market bullish phase. A termination of this ph...

We study a rational expectation model of bubbles and crashes. The model has two components : (1) our key assumption is that a crash may be caused by local self-reinforcing imitation between noise traders. If the tendency for noise traders to imitate their nearest neighbors increases up to a certain point called the ``critical'' point, all noise traders may place the same order (sell) at the same time, thus causing a crash. The interplay between the progressive strengthening o...

We critically review recent claims that financial crashes can be predicted using the idea of log-periodic oscillations or by other methods inspired by the physics of critical phenomena. In particular, the October 1997 `correction' does not appear to be the accumulation point of a geometric series of local minima.

We argue that the word ``critical'' in the title is not purely literary. Based on our and other previous work on nonlinear complex dynamical systems, we summarize present evidence, on the Oct. 1929, Oct. 1987, Oct. 1987 Hong-Kong, Aug. 1998 global market events and on the 1985 Forex event, for the hypothesis advanced four years ago that stock market crashes are caused by the slow buildup of long-range correlations between traders leading to a collapse of the stock market in o...

Recurrence Plot (RP) and Recurrence Quantification Analysis RQA) are signal numerical analysis methodologies able to work with non linear dynamical systems and non stationarity. Moreover they well evidence changes in the states of a dynamical system. It is shown that RP and RQA detect the critical regime in financial indices (in analogy with phase transition) before a bubble bursts, whence allowing to estimate the bubble initial time. The analysis is made on NASDAQ daily clos...