DISCRETE SCALE INVARIANCE IN STOCK MARKETS BEFORE CRASHES

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Abstract
We propose a picture of stock market crashes as critical points in a system with discrete scale invariance. The critical exponent is then complex, leading to log-periodic fluctuations in stock market indexes. We present “experimental” evidence in favor of this prediction. This picture is in the spirit of the known earthquake-stock market analogy and of recent work on log-periodic fluctuations associated with earthquakes.
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