Anticipating Economic Market Crises Using Measures of Collective Panic

Predicting panic is of critical importance in many areas of human and animal behavior, notably in the context of economics. The recent financial crisis is a case in point. Panic may be due to a specific external threat or self-generated nervousness. Here we show that the recent economic crisis and e...

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Bibliographic Details
Published in:PloS one 2015-07, Vol.10 (7), p.e0131871-e0131871
Main Authors: Harmon, Dion, Lagi, Marco, de Aguiar, Marcus A M, Chinellato, David D, Braha, Dan, Epstein, Irving R, Bar-Yam, Yaneer
Format: Article
Language:English
Subjects:
Animal behavior
Anxiety
Complex systems
Dow Jones averages
Economic Recession
Economics
Financial crises
Human behavior
Humans
Investments
Market prices
Markets
Markov analysis
Mimicry
Models, Econometric
Network topologies
Noise
Panic
Stock exchanges
Uncertainty
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Summary:Predicting panic is of critical importance in many areas of human and animal behavior, notably in the context of economics. The recent financial crisis is a case in point. Panic may be due to a specific external threat or self-generated nervousness. Here we show that the recent economic crisis and earlier large single-day panics were preceded by extended periods of high levels of market mimicry--direct evidence of uncertainty and nervousness, and of the comparatively weak influence of external news. High levels of mimicry can be a quite general indicator of the potential for self-organized crises.
ISSN:1932-6203
1932-6203
DOI:10.1371/journal.pone.0131871