Predicting Economic Market Crises Using Measures of Collective Panic

17 Pages Posted: 8 Jul 2011 Last revised: 22 Sep 2011

See all articles by Dion Harmon

Dion Harmon

New England Complex Systems Institute

Marcus A. M. de Aguiar

Universidade Estadual de Campinas (UNICAMP)

David D. Chinellato

Universidade Estadual de Campinas (UNICAMP)

Dan Braha

New England Complex Systems Institute

Irving Epstein

affiliation not provided to SSRN

Yaneer Bar-Yam

New England Complex Systems Institute

Date Written: February 13, 2011

Abstract

Predicting panic is of critical importance in many areas of human and animal behavior, notably in the context of economics. The recent financial crisis is a case in point. Panic may be due to a specific external threat, or self-generated nervousness. Here we show that the recent economic crisis and earlier large single-day panics were preceded by extended periods of high levels of market mimicry - direct evidence of uncertainty and nervousness, and of the comparatively weak influence of external news. High levels of mimicry can be a quite general indicator of the potential for self-organized crises.

Keywords: Quantitative Finance, Statistical Finance, Computer Science, Social and Information Networks, Physics and Society

Suggested Citation

Harmon, Dion and de Aguiar, Marcus A. M. and Chinellato, David D. and Braha, Dan and Epstein, Irving and Bar-Yam, Yaneer, Predicting Economic Market Crises Using Measures of Collective Panic (February 13, 2011). Available at SSRN: https://ssrn.com/abstract=1829224 or http://dx.doi.org/10.2139/ssrn.1829224

Dion Harmon

New England Complex Systems Institute ( email )

24 Mt. Auburn St.
Cambridge, MA 02138
United States

Marcus A. M. De Aguiar

Universidade Estadual de Campinas (UNICAMP) ( email )

Cidade Universitária Zeferino Vaz - Barão
Geraldo
Campinas - SP, 13083-970
Brazil

David D. Chinellato

Universidade Estadual de Campinas (UNICAMP) ( email )

Cidade Universitária Zeferino Vaz - Barão
Geraldo
Campinas - SP, 13083-970
Brazil

Dan Braha

New England Complex Systems Institute ( email )

277 Broadway
Cambridge, MA 02138
United States

Irving Epstein

affiliation not provided to SSRN ( email )

Yaneer Bar-Yam (Contact Author)

New England Complex Systems Institute ( email )

24 Mt. Auburn St.
Cambridge, MA 02138
United States

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