Analysis of the Lehman Brothers collapse and the Flash Crash event by applying wavelets methodologies

In this study, we apply a wavelet methodology initially developed for geophysical data to financial data. Specifically, the method distinguishes between natural tectonic earthquakes and man made explosions. We exemplify using time series data from two financial events: the Lehman Brothers collapse a...

Full description

Saved in:
Bibliographic Details
Published in:Physica A 2017-05, Vol.474, p.162-171
Main Authors: Beccar-Varela, Maria P., Mariani, Maria C., Tweneboah, Osei K., Florescu, Ionut
Format: Article
Language:English
Subjects:
Flash Crash event
High frequency financial data
Lehman Brothers collapse
Wavelets methodology
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In this study, we apply a wavelet methodology initially developed for geophysical data to financial data. Specifically, the method distinguishes between natural tectonic earthquakes and man made explosions. We exemplify using time series data from two financial events: the Lehman Brothers collapse and the Flash Crash event. We conclude that the Lehman Brothers collapse behaves like a natural earthquake while the Flash Crash event behaves like a human made explosion. This study may imply that the Lehman Brothers type events may be predicted, while sudden Flash Crash type events are not predictable. •Improve the analysis and understanding of parameters associated to critical events.•Discriminate between the Lehman Brothers collapse and the Flash Crash event.•Model and describe some of the key distributional features of typical high frequency financial data.
ISSN:0378-4371
1873-2119
DOI:10.1016/j.physa.2017.01.064