Publication detail

Vosvrda M., Baruník J.: Modelování krachů na kapitálových trzích: Aplikace teorie stochastických katastrof

Author(s): doc. PhDr. Jozef Baruník Ph.D.,
prof. Ing. Miloslav Vošvrda CSc.,
Type: Articles in journals with impact factor
Year: 2008
Number: 6
ISSN / ISBN: 0032-3233
Published in: Politická Ekonomie 6, pp. 759-771 PDF
Publishing place: Prague
Keywords: cusp catastrophe, bifurcations, singularity, nonlinear dynamics, stock market crash
JEL codes: C01, C53
Suggested Citation: Vosvrda M., Baruník J. (2008): Modelování krachů na kapitálových trzích: Aplikace teorie stochastických katastrof, Politická Ekonomie 6(56):759-771
Grants: GAUK 46108: New Nonlinear Capital Markets Theories: Fractal, Bifurcational and Behavioral Approach IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: We show that the cusp catastrophe model explains the crash of stock exchanges much better than other models. On the data of U.S. stock markets we demonstrate that the crash of 1987 may be better explained by cusp catastrophe theory, which is not true for the crash of 2001. With the help of sentiment measures, such as index put/call options ratio and volume (the former models the proportion of the chartists, while the latter the fundamentalists), we have found that the 1987 returns are clearly bimodal and contain bifurcation flags. The cusp catastrophe model fits these data better then alternative models. Therefore we may say that the crash may have been led by internal forces. However, the causes for the crash of Sept. 11, 2001 are external, which is also evident in much weaker presence of bifurcations in the data. Thus alterantive models may be used for its explanation.
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