A WhIMS For Financial Crises

This paper introduces a quantitative measure of financial disturbances, which captures the heterogeneity of investor horizons - from day traders to pension funds. This risk measure, called "Wavelet-heterogeneous Index of Market Shocks" (WhIMS), is based on the combination of two methods: the Wavelet Packet Sub-band Decomposition and the constrained Independent Component Analysis. The authors apply this measure on the French Stock Market to date and gauge the severity of financial crises. A state separation of financial disturbances is finally performed using a nonlinear classification.