US Market Systemic Collapses Since 2002
Author Information
Author(s): Kenett Dror Y., Shapira Yoash, Madi Asaf, Bransburg-Zabary Sharron, Gur-Gershgoren Gitit, Ben-Jacob Eshel
Primary Institution: Tel-Aviv University
Hypothesis
The study investigates the dynamics of the S&P500 index and its constituent stocks to understand market transitions and systemic collapses.
Conclusion
The study reveals that the US market became prone to systemic collapses after a significant transition in market dynamics at the end of 2001.
Supporting Evidence
- The market transitioned from a flexible state to a stiff state at the end of 2001.
- High stock correlations were observed, reminiscent of epileptic brain activity.
- The index cohesive force (ICF) was used to identify structural changes in the market.
Takeaway
The study shows that the stock market changed in a way that made it more likely to crash after 2001, similar to how a brain can have seizures.
Methodology
The study analyzed the S&P500 dynamics from April 1999 to April 2010 using index cohesive force and Eigenvalue entropy.
Limitations
The analysis is limited to the S&P500 index and may not generalize to other markets.
Digital Object Identifier (DOI)
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