Shocks In Financial Markets, Price Expectation, And Damped Harmonic Oscillators

Using a modified damped harmonic oscillator model equivalent to a model of market dynamics with price expectations, the authors analyze the reaction of financial markets to shocks. In order to do this, they gather data from indices of a variety of financial markets for the 1987 Black Monday, the Russian crisis of 1998, the crash after September 11th (2001), and the recent downturn of markets due to the subprime mortgage crisis in the USA (2008). Analyzing those data, they were able to establish the amount by which each market felt the shocks, a dampening factor which expresses the capacity of a market of absorbing a shock, and also a frequency related with volatility after the shock.

Provided by: Insper Institute of Education and Research Topic: Big Data Date Added: Mar 2011 Format: PDF

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