Why Stock Markets Crash: Critical Events in Complex Financial Systems

Why Stock Markets Crash: Critical Events in Complex


Why Stock Markets Crash: Critical Events in Complex Financial Systems [PDF / Epub] ✓ Why Stock Markets Crash: Critical Events in Complex Financial Systems ★ Didier Sornette – Polishdarling.co.uk The scientific study of complex systems has transformed a wide range of disciplines in recent years, enabling researchers in both the natural and social sciences to model and predict phenomena as dive The scientific study Markets Crash: PDF/EPUB ã of complex systems has transformed a wide range of disciplines in recent years, enabling researchers in both the natural and social sciences to model and predict phenomena as diverse as earthquakes, global warming, demographic patterns, financial crises, and the failure of materials In this book, Didier Sornette boldly applies his varied experience in these areas to propose a simple, powerful, and general theory of how, why, and when stock markets crashMost attempts to explain market failures seek to pinpoint triggering mechanisms that occur hours, days, or weeks before the collapse Sornette proposes a radically Why Stock MOBI :ï different view the underlying cause can be sought months and even years before the abrupt, catastrophic event in the build up of cooperative speculation, which often translates into an accelerating rise of the market price, otherwise known as a bubble Anchoring his sophisticated, step by step analysis in leading edge physical and statistical modeling techniques, he unearths remarkable insights and some predictions among them, that the end of the growth era will occur around Sornette probes major historical precedents, from the decades long tulip mania in the Netherlands that wilted suddenly into the South Sea Bubble that ended Stock Markets Crash: Kindle Ò with the first huge market crash in England in , to the Great Crash of Octoberand Black Monday in , to cite just a few He concludes that most explanations other than cooperative self organization fail to account for the subtle bubbles by which the markets lay the groundwork for catastropheAny investor or investment professional who seeks a genuine understanding of looming financial disasters should read this book Physicists, geologists, biologists, economists, and others will welcome Why Stock Markets Crash as a highly original scientific tale, as Sornette aptly puts it, of the exciting and sometimes fearsome but no longer quite so unfathomable world of stock markets.

    Download Book Best Sellers in PDF format price, otherwise known as a bubble Anchoring his sophisticated, step by step analysis in leading edge physical and statistical modeling techniques, he unearths remarkable insights and some predictions among them, that the end of the growth era will occur around Sornette probes major historical precedents, from the decades long tulip mania in the Netherlands that wilted suddenly into the South Sea Bubble that ended Stock Markets Crash: Kindle Ò with the first huge market crash in England in , to the Great Crash of Octoberand Black Monday in , to cite just a few He concludes that most explanations other than cooperative self organization fail to account for the subtle bubbles by which the markets lay the groundwork for catastropheAny investor or investment professional who seeks a genuine understanding of looming financial disasters should read this book Physicists, geologists, biologists, economists, and others will welcome Why Stock Markets Crash as a highly original scientific tale, as Sornette aptly puts it, of the exciting and sometimes fearsome but no longer quite so unfathomable world of stock markets."/>
  • Hardcover
  • 448 pages
  • Why Stock Markets Crash: Critical Events in Complex Financial Systems
  • Didier Sornette
  • English
  • 15 April 2017
  • 0691096309

About the Author: Didier Sornette

Is a well Markets Crash: PDF/EPUB ã known author, some of his books are a fascination for readers like in the Why Stock Markets Crash: Critical Events in Complex Financial Systems book, this is one of the most wanted Didier Sornette author readers around the world.



10 thoughts on “Why Stock Markets Crash: Critical Events in Complex Financial Systems

  1. Jacob Jacob says:

    It is fair to compare this book to the Black Swan by Nassim Taleb Here an attempt is made to analyze and quantity instabilities of the Black Swan variety mostly the stock market s but the final chapter contains an analysis of civilization itself The book is VERY rich in concepts and ideas, muchso than most books It also assumes a lot from the reader If, for example, Ising model, K selected, or Polya s Urn doesn t ring a bell for you, this may be too difficult a read.

  2. Stephan Pire Stephan Pire says:

    I greatly recommend this book It goes from the history of crashes down to the detail on how to predict market events through physics fractal

  3. Richard Crowder Richard Crowder says:

    Do not buy this as an e book a couple of Princeton e books on mathematical subjects that I ve bought had bad misprints in the formulas For this book, I read the paperback 2017 edition with a new preface by the author.Stock market crashes generally take everyone by surprise they feel like bolts from the blue They re usually not Sornette shows how the interplay of greed, fear, and imitation among investors and traders creates an accelerating rhythm of sudden rises alternating with increasingl Do not buy this as an e book a couple of Princeton e books on mathematical subjects that I ve bought had bad misprints in the formulas For this book, I read the paperback 2017 edition with a new preface by the author.Stock market crashes generally take everyone by surprise they feel like bolts from the blue They re usually not Sornette shows how the interplay of greed, fear, and imitation among investors and traders creates an accelerating rhythm of sudden rises alternating with increasingly brief pauses This mathematical signature can begin months or years in advance, but its predictive value rises in the last year before the death of the bubble which may be relatively calm, but usually is followed by a crash.Sornette presents the results of several predictions made using this technique While his track record is not perfect, it is strongly better than what could be expected from chance Although the math is advanced, the discussion and the graphs make the argument clear to the lay reader.What about the everyday investors who don t have access to Sornette s computational skills The lesson is straightforward as markets rise, and especially as they rise sharply, so does the danger of a crash As they watch a sharp rise, investors should reduce their equity positions to capture gains made so far and limit the danger to their portfolios.But let s assume that you re not in the stock market and don t plan to be The last chapter broadens the discussion to consider a wide range of problems confronting the world in the period from the year of publication 2002 to the potential end of the growth era around 2050 Many of the trends described have only becomepressing since 2002 This book is both important and fascinating not just for investors but also for citizens of an uncertain world

  4. Andrew Davis Andrew Davis says:

    An extremely informative text for those interested in economics and econometrics The author is a leading authority in the field He covers a range of approaches in analysing variations of the stock markets This is not a book to be read and put aside, but rather referred to from time to time The additional benefit of the book is almost 500 references that extend on the topics discussed in the book Due to limited size of the book, some of them are critical in understanding the various topics.T An extremely informative text for those interested in economics and econometrics The author is a leading authority in the field He covers a range of approaches in analysing variations of the stock markets This is not a book to be read and put aside, but rather referred to from time to time The additional benefit of the book is almost 500 references that extend on the topics discussed in the book Due to limited size of the book, some of them are critical in understanding the various topics.The book covers in details the GARCH models, complex fractal dimensions and log periodicity It conducts a forensic analysis of major crashes and provides guidelines for predicting any future disturbances

  5. Jesse Ammon Jesse Ammon says:

    Overly detailed on tangential topics, and highly mathematics based, it does provide an interesting model for predicting stock market crashes through power laws and log periodicity This gains my attention because it appears to improve on Hurst cycles and other work on finding waves in the market.For those seeking to find the holy grail of a mathematical model for the market, this is compelling Translating it into an actionable tool is probably far away.

  6. Yates Buckley Yates Buckley says:

    An important technical text that evalutes the dynamics of market crashes, through simulation and mathematical modeling.Thr text is also confusignly written, disorienting in structure, so that by the end you are not sure what to take away to your everyday life.

  7. Ethan Drower Ethan Drower says:

    I d skip this one.

  8. Mario C Mario C says:

    Thoughts on what is a very interesting book on capital markets behavior that is not well understood.Stock market crashes are caused by the slow build up of long range correlations leading to a global cooperative behavior of the market and eventually resulting in a collapse in a short, critical time interval Crash may be caused by local self reinforcing imitation between traders If traders arelikely to imitate other traders which increases up to a certain point critical point by placi Thoughts on what is a very interesting book on capital markets behavior that is not well understood.Stock market crashes are caused by the slow build up of long range correlations leading to a global cooperative behavior of the market and eventually resulting in a collapse in a short, critical time interval Crash may be caused by local self reinforcing imitation between traders If traders arelikely to imitate other traders which increases up to a certain point critical point by placing the same type of order all buys or all sells increases the probability of a crash Frame work for understanding needs to be probabilistic b c crashes are not certain outcomes Bubbles manifest themselves as overall super exponential power law acceleration in the price decorated by log periodic precursors a concept related to fractals Bubbles across epochs share a common underlying background as well as structureo Rationale rooted in the fact that humans are endowed with the same basic human emotions across history fear and greed Large crashes are not the same as a single large decline they are fundamentally different events i.e A 1% decline is not the same event as a 10% decline and cannot be modeled as suchFinancial Crashes are Outliers In the Bachelier Samuelson financial world, in which distributions are normally Gaussian, bell shaped distributed, all returns are scaled according to a fundamental ruler called Standard deviation In reality, returns are not Gaussian They are not far from exponential law Under Gaussian assumptions Oct 19 1987 22.6% Oct 20, 1987 rebound 9.7% should not occur They are essentially impossible Under exponential law rebound of 9.7% less extraordinary, once every 22,026 days or 88 yrs, 22.6% should occur every 520 million yrs still qualifies as an outlier Can t look at individual return data and assume that each successive return is uncorrelated Drawdowns preserve the information in busts of activity that demonstrate local dependence Body and tail of distributions are made up of 2 different populations that have different physics, scaling properties Large outliers are not scaled up versions of small fluctuationso Distribution is made up of 2 different populations the body tail, which have different physics, scaling properties Drawdown calculation, rather than daily or weekly returns or any other fixed time scale returns, areadequate time elastic measures of price moveso Simply looking at daily returns and their distributions destroys information that the daily returns may correlated at specific timesPositive Feedbacks positive feedback asserts that the higher the price or the price return in the recent past, the higher will be the price growth in the future There is growing empirical evidence of the existence of herd or crowd behavior in speculative markets It Is Optimal to Imitate When Lacking InformationModeling Financial Bubbles and Market CrashesModels are synthetic sets of rules, pictures, and algorithms providing us with usefulrepresentations of the world of our perceptions and of their patterns More correct bounded rationality They do not have perfect knowledge long list of irrational or anomalous behavior shown by human beings in certain specific systematic ways should not confuse us the relevant task for understanding stock markets is not so much to focus on these irrationalities but rather to study how they aggregate in the complex, long lasting, repetitive, and subtle environment of the market The Risk Driven Model Models investor behaviours, developed to formalize herd behavior or mutual mimetic contagion in speculative markets The emergence of bubbles is explained as a self organizing process of infection among traders Its key assumption is that a crash may be caused by local selfreinforcing imitation between traders This self reinforcing imitation process leads to the blossoming of a bubble If the tendency for traders to imitate their friends increases up to a certain point called the critical point, many traders may place the same order sell at the same time, thus causing a crash The interplay between the progressive strengthening of imitation and the ubiquity of noise requires a stochastic description a crash is not certain but can be characterized by its hazard rate that is, the probability per unit time that the crash will happen in the next instant provided it has not happened yet Since the crash is not a certain deterministic outcome of the bubble, it remains rational for traders to remain invested provided they are compensated by a higher rate of growth of the bubble for taking the risk of a crash, because there is a finite probability of landing smoothly, that is, of attaining the end of the bubble without crash In this model, the ability to predict the critical date is perfectly consistent with the behavior of the rational agents they all know this date, the crash may happen anyway, and they are unable to make any abnormal riskadjusted profits by using this information

  9. Stevenglinert Stevenglinert says:

    I read most of this while shit was running on my computer in the GSB library I m sure the MBAs love it So, like Lacan always uses math terminology in this like weird bullshit way and this was similar This felt like a guy trying to rewrite Kindleberger withcomplex math and a cool cover Wow such fractal But he s a geophysicist and like, his attempts at economics and social science came off as forced Just read Kindleberger and Shiller s Irrational Exuberance and like don t bother.

  10. Andre Luis Andre Luis says:

    N o pude ler o livro todo Muito matem tico e demonstra muita confian a em equa es baseadas em dados hist ricos.Apresenta algumas argumenta es interessantes sobre como modelar o mercado de capitais e sobre rational expectations V lido para lembrar sobre bolhas e seus efeitos.

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Your email address will not be published. Required fields are marked *


10 thoughts on “Why Stock Markets Crash: Critical Events in Complex Financial Systems

  1. Jacob Jacob says:

    It is fair to compare this book to the Black Swan by Nassim Taleb Here an attempt is made to analyze and quantity instabilities of the Black Swan variety mostly the stock market s but the final chapter contains an analysis of civilization itself The book is VERY rich in concepts and ideas, muchso than most books It also assumes a lot from the reader If, for example, Ising model, K selected, or Polya s Urn doesn t ring a bell for you, this may be too difficult a read.


  2. Stephan Pire Stephan Pire says:

    I greatly recommend this book It goes from the history of crashes down to the detail on how to predict market events through physics fractal


  3. Richard Crowder Richard Crowder says:

    Do not buy this as an e book a couple of Princeton e books on mathematical subjects that I ve bought had bad misprints in the formulas For this book, I read the paperback 2017 edition with a new preface by the author.Stock market crashes generally take everyone by surprise they feel like bolts from the blue They re usually not Sornette shows how the interplay of greed, fear, and imitation among investors and traders creates an accelerating rhythm of sudden rises alternating with increasingl Do not buy this as an e book a couple of Princeton e books on mathematical subjects that I ve bought had bad misprints in the formulas For this book, I read the paperback 2017 edition with a new preface by the author.Stock market crashes generally take everyone by surprise they feel like bolts from the blue They re usually not Sornette shows how the interplay of greed, fear, and imitation among investors and traders creates an accelerating rhythm of sudden rises alternating with increasingly brief pauses This mathematical signature can begin months or years in advance, but its predictive value rises in the last year before the death of the bubble which may be relatively calm, but usually is followed by a crash.Sornette presents the results of several predictions made using this technique While his track record is not perfect, it is strongly better than what could be expected from chance Although the math is advanced, the discussion and the graphs make the argument clear to the lay reader.What about the everyday investors who don t have access to Sornette s computational skills The lesson is straightforward as markets rise, and especially as they rise sharply, so does the danger of a crash As they watch a sharp rise, investors should reduce their equity positions to capture gains made so far and limit the danger to their portfolios.But let s assume that you re not in the stock market and don t plan to be The last chapter broadens the discussion to consider a wide range of problems confronting the world in the period from the year of publication 2002 to the potential end of the growth era around 2050 Many of the trends described have only becomepressing since 2002 This book is both important and fascinating not just for investors but also for citizens of an uncertain world


  4. Andrew Davis Andrew Davis says:

    An extremely informative text for those interested in economics and econometrics The author is a leading authority in the field He covers a range of approaches in analysing variations of the stock markets This is not a book to be read and put aside, but rather referred to from time to time The additional benefit of the book is almost 500 references that extend on the topics discussed in the book Due to limited size of the book, some of them are critical in understanding the various topics.T An extremely informative text for those interested in economics and econometrics The author is a leading authority in the field He covers a range of approaches in analysing variations of the stock markets This is not a book to be read and put aside, but rather referred to from time to time The additional benefit of the book is almost 500 references that extend on the topics discussed in the book Due to limited size of the book, some of them are critical in understanding the various topics.The book covers in details the GARCH models, complex fractal dimensions and log periodicity It conducts a forensic analysis of major crashes and provides guidelines for predicting any future disturbances


  5. Jesse Ammon Jesse Ammon says:

    Overly detailed on tangential topics, and highly mathematics based, it does provide an interesting model for predicting stock market crashes through power laws and log periodicity This gains my attention because it appears to improve on Hurst cycles and other work on finding waves in the market.For those seeking to find the holy grail of a mathematical model for the market, this is compelling Translating it into an actionable tool is probably far away.


  6. Yates Buckley Yates Buckley says:

    An important technical text that evalutes the dynamics of market crashes, through simulation and mathematical modeling.Thr text is also confusignly written, disorienting in structure, so that by the end you are not sure what to take away to your everyday life.


  7. Ethan Drower Ethan Drower says:

    I d skip this one.


  8. Mario C Mario C says:

    Thoughts on what is a very interesting book on capital markets behavior that is not well understood.Stock market crashes are caused by the slow build up of long range correlations leading to a global cooperative behavior of the market and eventually resulting in a collapse in a short, critical time interval Crash may be caused by local self reinforcing imitation between traders If traders arelikely to imitate other traders which increases up to a certain point critical point by placi Thoughts on what is a very interesting book on capital markets behavior that is not well understood.Stock market crashes are caused by the slow build up of long range correlations leading to a global cooperative behavior of the market and eventually resulting in a collapse in a short, critical time interval Crash may be caused by local self reinforcing imitation between traders If traders arelikely to imitate other traders which increases up to a certain point critical point by placing the same type of order all buys or all sells increases the probability of a crash Frame work for understanding needs to be probabilistic b c crashes are not certain outcomes Bubbles manifest themselves as overall super exponential power law acceleration in the price decorated by log periodic precursors a concept related to fractals Bubbles across epochs share a common underlying background as well as structureo Rationale rooted in the fact that humans are endowed with the same basic human emotions across history fear and greed Large crashes are not the same as a single large decline they are fundamentally different events i.e A 1% decline is not the same event as a 10% decline and cannot be modeled as suchFinancial Crashes are Outliers In the Bachelier Samuelson financial world, in which distributions are normally Gaussian, bell shaped distributed, all returns are scaled according to a fundamental ruler called Standard deviation In reality, returns are not Gaussian They are not far from exponential law Under Gaussian assumptions Oct 19 1987 22.6% Oct 20, 1987 rebound 9.7% should not occur They are essentially impossible Under exponential law rebound of 9.7% less extraordinary, once every 22,026 days or 88 yrs, 22.6% should occur every 520 million yrs still qualifies as an outlier Can t look at individual return data and assume that each successive return is uncorrelated Drawdowns preserve the information in busts of activity that demonstrate local dependence Body and tail of distributions are made up of 2 different populations that have different physics, scaling properties Large outliers are not scaled up versions of small fluctuationso Distribution is made up of 2 different populations the body tail, which have different physics, scaling properties Drawdown calculation, rather than daily or weekly returns or any other fixed time scale returns, areadequate time elastic measures of price moveso Simply looking at daily returns and their distributions destroys information that the daily returns may correlated at specific timesPositive Feedbacks positive feedback asserts that the higher the price or the price return in the recent past, the higher will be the price growth in the future There is growing empirical evidence of the existence of herd or crowd behavior in speculative markets It Is Optimal to Imitate When Lacking InformationModeling Financial Bubbles and Market CrashesModels are synthetic sets of rules, pictures, and algorithms providing us with usefulrepresentations of the world of our perceptions and of their patterns More correct bounded rationality They do not have perfect knowledge long list of irrational or anomalous behavior shown by human beings in certain specific systematic ways should not confuse us the relevant task for understanding stock markets is not so much to focus on these irrationalities but rather to study how they aggregate in the complex, long lasting, repetitive, and subtle environment of the market The Risk Driven Model Models investor behaviours, developed to formalize herd behavior or mutual mimetic contagion in speculative markets The emergence of bubbles is explained as a self organizing process of infection among traders Its key assumption is that a crash may be caused by local selfreinforcing imitation between traders This self reinforcing imitation process leads to the blossoming of a bubble If the tendency for traders to imitate their friends increases up to a certain point called the critical point, many traders may place the same order sell at the same time, thus causing a crash The interplay between the progressive strengthening of imitation and the ubiquity of noise requires a stochastic description a crash is not certain but can be characterized by its hazard rate that is, the probability per unit time that the crash will happen in the next instant provided it has not happened yet Since the crash is not a certain deterministic outcome of the bubble, it remains rational for traders to remain invested provided they are compensated by a higher rate of growth of the bubble for taking the risk of a crash, because there is a finite probability of landing smoothly, that is, of attaining the end of the bubble without crash In this model, the ability to predict the critical date is perfectly consistent with the behavior of the rational agents they all know this date, the crash may happen anyway, and they are unable to make any abnormal riskadjusted profits by using this information


  9. Stevenglinert Stevenglinert says:

    I read most of this while shit was running on my computer in the GSB library I m sure the MBAs love it So, like Lacan always uses math terminology in this like weird bullshit way and this was similar This felt like a guy trying to rewrite Kindleberger withcomplex math and a cool cover Wow such fractal But he s a geophysicist and like, his attempts at economics and social science came off as forced Just read Kindleberger and Shiller s Irrational Exuberance and like don t bother.


  10. Andre Luis Andre Luis says:

    N o pude ler o livro todo Muito matem tico e demonstra muita confian a em equa es baseadas em dados hist ricos.Apresenta algumas argumenta es interessantes sobre como modelar o mercado de capitais e sobre rational expectations V lido para lembrar sobre bolhas e seus efeitos.


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Your email address will not be published. Required fields are marked *