Market Crashes as Critical Phenomena? Explanation, Idealization, and Universality in Econophysics

32 Pages Posted: 18 Apr 2017

See all articles by Jennifer Jhun

Jennifer Jhun

Lake Forest College

Patricia Palacios

Ludwig-Maximilians-Universität München

James Weatherall

University of California, Irvine

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

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

Jennifer Jhun (Contact Author)

Lake Forest College ( email )

555 N. Sheridan Rd
Lake Forest, IL 60045
United States

Patricia Palacios

Ludwig-Maximilians-Universität München ( email )

James Weatherall

University of California, Irvine ( email )

Campus Drive
Irvine, CA California 62697-3125
United States

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