The Geometry of Crashes - A Measure of the Dynamics of Stock Market Crises

• Autor(es): Araújo, Tanya ; Louçã, Francisco
• Data: 2005
• Identificador Persistente: http://hdl.handle.net/10400.5/2683
• Origem: Repositório da UTL
• Assunto(s): financial markets; stochastic geometry; complexity; market spaces; market structures.
• Tipo de Documento: Outro
• Idioma: Inglês

Descrição

This paper investigates the dynamics of stocks in the S&P500 index for the last 30 years. Using a stochastic geometry technique, we investigate the evolution of the market space and define a new measure for that purpose, which is a robust index of the dynamics of the market structure and provides information on the intensity and the sectoral impact of the crises. With this measure, we analyze the effects of some extreme phenomena on the geometry of the market. Nine crashes between 1987 and 2001 are compared by looking at the way they modify the shape of the manifold that describes the S&P500 market space. These crises are identified as (a) structural, (b) general and (c) local.