Discrete Scale Invariance in Stock Markets before Crashes
International Journal of Modern Physics B
We propose a picture of stock market crashes as critical points in a system with discrete scale invariance. The critical exponent is then complex, leading to log-periodic fluctuations in stock market indexes. We present “experimental” evidence in favor of this prediction. This picture is in the spirit of the known earthquake-stock market analogy and of recent work on log-periodic fluctuations associated with earthquakes.
Feigenbaum, J. A. and P.G.O. Freund, (1996), “Discrete Scale Invariance in Stock Markets before Crashes,” International Journal of Modern Physics B 10: 3737-3745.