Work detail

Financial earthquakes: Are volatility correlations related to Omori's law?

Author: Bc. Vlastimil Bureš
Year: 2014 - summer
Leaders: prof. PhDr. Ladislav Krištoufek Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 76
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/137325/
Abstract: The purpose of this thesis is to analyze the market dynamics in periods fol-
lowing a large nancial shock. In order to do so, we compute the cumulative
number of times the volatility is greater than a given threshold. Such a method
is analogous to Omori's law from geophysics. We draw statistical evidence from
three di erent events. The rst one is concerned with the death of Steve Jobs
and how it a ected the evolution of Apple's share price. The second one focuses
on the Flash Crash of 2010 when the Dow Jones Industrial Average experienced
the largest drop of 900 points. And the last one is when IBM announced its
2013Q1 earnings which were signi cantly below expectations. By employing
two di erent approaches to volatility calculation, we are able to compare the
obtained results and thus draw a more de nite conclusion. Our ndings sug-
gest that the decay rate of after-shocks for the considered earthquakes is well
described by a power-law which is analogous to Omori's law
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