What Can the Log-periodic Power Law Tell about Stock Market Crash in India?
Varun Sarda, Yamini Karmarkar, Neha Lakhotia, and Pratima Sen
Stock markets have been of great interest to investors and academicians due to uncertainty and expected pecuniary profits attached to them. For a few years, the Indian capital market has seen high volatility and market crashes. Market crashes are often preceded by speculative bubbles with two main characteristics: (a) power law acceleration of the market price, and (b) log-periodic oscillations. This paper attempts to investigate whether the Indian stock market follows log-periodicity. Here log-periodicity refers to the fact that the oscillations are periodic in the logarithm of the time-to-crash. Speculative bubbles of financial markets show similarities in the way they evolve and grow. This particular oscillating movement can be captured by the log-periodic power law. If market follows log-periodicity, the crashes may be predicted. The analysis shows that log-periodic oscillations are present in the Indian stock market.
คำสำคัญ: log-periodic, stock market, stock market crashes
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