Work detail

Scale of Market Movements for US stock market

Author: Bc. Radim Kašpárek
Year: 2017 - summer
Leaders: doc. PhDr. Ladislav Krištoufek Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 68
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/185501/
Abstract: Currently, there is no singular, codified, and widely accepted approach towards
measuring the depth of financial crises. One of the approaches applied
towards this problematic has been to build on the observed similarity
between financial markets and dynamic systems in physics and to create
analogous systems. The Scale of Market Shocks originally proposed for
foreign exchange markets has been adapted for the US stock market in order
to provide US policy makers with a tool to assess the severity of such
crises. Using methodology adapted from relevant research and literature we
used volatilities calculated with different sampling resolution as the basis for
our scale as we believe that these capture the behavior of different market
agents. The resultant scale correctly identifies sharp movements and assign
them a numerical value that denotes the importance of a crash. This scale
is applicable for US policy makers to assess outcomes of proposed policies,
however, the use of Principal Component Analysis to ease the computational
complexity proved to not yield required results.
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