Market Crashes as Critical Phenomena? Explanation, Idealization, and Universality in Econophysics
32 Pages Posted: 18 Apr 2017
Date Written: April 16, 2017
Abstract
We study the Johansen-Ledoit-Sornette (JLS) model of financial market crashes (Johansen, Ledoit, and Sornette [2000,]. “Crashes as Critical Points.” Int. J. Theor. Appl. Finan 3(2) 219- 255). On our view, the JLS model is a curious case from the perspective of the recent philosophy of science literature, as it is naturally construed as a “minimal model” in the sense of Batterman and Rice (Batterman and Rice [2014] “Minimal Model Explanations.” Phil. Sci. 81(3): 349–376) that nonetheless provides a causal explanation of market crashes, in the sense of Woodward’s interventionist account.
Suggested Citation: Suggested Citation
Jhun, Jennifer and Palacios, Patricia and Weatherall, James, Market Crashes as Critical Phenomena? Explanation, Idealization, and Universality in Econophysics (April 16, 2017). Available at SSRN: https://ssrn.com/abstract=2953516 or http://dx.doi.org/10.2139/ssrn.2953516
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