Econophysicist Predicts Date of Chinese Stock Market Collapse (Next Week)

http://www.technologyreview.com/blog/arxiv/23839/

by Anon84 • 17 years ago

23 23 17 years ago

The article says economics (well, graphs of stock prices) are scale free. Is this true? Seems hard to prove, can anyone point to any research?

jk4930• 17 years ago

I have some books on complex networks and some on computational finance, it's common knowledge that such graphs are scale invariant (and not hard to show, because you just measure relations of ups and downs and volatility a.s.o.and see that they are independent from the absolute numbers on the graph scale). Many people like the works of Benoit Mandelbrot on fractals in finance. Google these keywords.

Anon842• 17 years ago

Can you recommend any?

nostrademons• 17 years ago

A fun exercise is to hook a randomwalk up to a pretty charting package, show the resulting charts to a finance person, and watch them ask "What stock is that?" I did that all the time when I was working at a financial software startup. (Mostly because I was working on our charting library and needed fake data to test...)

joe_the_user3• 17 years ago

Benoit Mandlebrot said that in the sixties.

But the scale-free quality does not imply predictability. In fact, I suspect it implies the opposite.

mediaman• 17 years ago

Indeed it is true, except for very short periods of time where it begins to break down. In quantitative finance one can model the market or an individual stock as a Brownian motion with a long term upwards drift. The results look startlingly similar to what we're used to seeing on actual stock charts.

discojesus2• 17 years ago

Econophysicist?

Does he study the supply and demand for pendula and inclined planes?

adw2• 17 years ago

Econophysicists, roughly speaking, model economic systems using techniques from statistical mechanics; not nearly as silly an idea as it might seem at first blush.

discojesus2• 17 years ago

a) 'twas a joke, sir. :)

and b) the idea may not be silly but the name sure is. By this nomenclature, all current economists should more properly be called "Econostatisticians" or "Econopsychologists" (to quote Charlie Munger speaking about the silliness of the term "Behavioral Economics": "If economics isn't behavioral, then what the hell is it?!?")

No offense meant, of course. I just think it's a bit humorous. He's an economist who uses methods from physics, that's all - no need to make up a new name for it (let alone a name that sounds even dopier than the previous name).

joe_the_user3• 17 years ago

Oddly enough, a lot of econophysics went into justifying the recent bubble and the creators of heat-equation-inspired Black-Scholes equations were directly responsible for the LTCM collapse in 1998.

Econophysics doesn't have a "not snake oil" feel to it...

biohacker42• 17 years ago

I predict the Shanghai Composite Index will NOT burst between the 17th and 27th July. If my prediction is correct I will happily predict lottery numbers for anyone who asks.

henning2• 17 years ago

I predict there is a 50% chance you are either right or wrong.

jrandom• 17 years ago

I predict there is a 100% chance that he is either right or wrong.

paraschopra• 17 years ago

Such kind of predictions have a funny impact. Imagine if people start believing the prediction 100%, they would start selling out or short the market. And those actions collectively would result in a crash.

TriinT• 17 years ago

Self-fulfilling prophecies, they're called.

ynniv• 17 years ago

All the more reason to make sure that everyone hears you.

christopherolah• 17 years ago

Perhaps that's what he intends... Maybe the reason he isn't giving the reason he is predicting the collapse is because the reason is to see what effect his prediction has on the market.

BearOfNH• 17 years ago

There's a total solar eclipse over China on the 22nd, exactly midway between the forecast dates. Quite a coincidence, if that's what it is.

In any event the prediction is NOT for the market to tank within the quoted timeframe ... rather that the market will PEAK between 7/17 and 7/27. This would be followed by a period of weakness possibly leading to a crash. If the experience of the USA in 1929 and 1987 is any guide, you would look for a crash low 55 days later (9/15) or possibly 89 days later (10/19).

Then again, maybe not.

Econophysicist Predicts Date of Chinese Stock Market Collapse (Next Week)

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