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2006 | 4 | 1 | 58-72

Article title

Stock mechanics: Predicting recession in S&P500, DJIA and NASDAQ



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Proposed in this paper is an original method assuming potential and kinetic energies for prices and for the conservation of their sum that has been developed for forecasting exchanges. Connections with a power law are shown. Semiempirical applications on the S&P500, DJIA, and NASDAQ predict a forthcoming recession in them. An emerging market, the Istanbul Stock Exchange index ISE-100 is found harboring a potential to continue to rise.










Physical description


1 - 3 - 2006
1 - 3 - 2006


  • Department of Physics, Middle East Technical University, 06531, Ankara, Turkey


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  • [4] R. Cont and J.-P. Bouchaud: “Herd behavior and aggregate fluctuations in financial markets”, Macroeconomic Dynamics, Vol. 4, (2000), pp. 170–196. http://dx.doi.org/10.1017/S1365100500015029[Crossref]
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  • [7] D. Sornette and K. Ide: “Theory of self-similar oscillatory finite-time singularities in Finance, Population and Rupture”, Int. J. Mod. Phys. C, Vol. 14(3), (2002), pp. 267–275; Preprint: arXiv:cond-mat/0106054.
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  • [14] D. Sornette: “Discrete scale invariance and complex dimensions”, Phys. Rep., Vol. 297, (1998), pp. 239–270; Preprint: arXiv:cond-mat/cond-mat/9707012. http://dx.doi.org/10.1016/S0370-1573(97)00076-8[Crossref]
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  • [18] Y. Huang, H. Saleour, C.G. Sammis and D. Sornette: “Precursors, aftershocks, criticality and self-organized criticality”, Europhys. Lett., Vol. 41, (1998), pp. 43–48; Preprint: arXiv:cond-mat/9612065. http://dx.doi.org/10.1209/epl/i1998-00113-x[Crossref]
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  • [21] S. Drożdż, F. Grümmer, F. Ruf and J. Speth: “Log-periodic self-similarity: an emerging financial law?”, Physica A, Vol. 324, (2003), pp. 174–182. http://dx.doi.org/10.1016/S0378-4371(02)01848-4[Crossref]
  • [22] J.-P. Bouchaud, M. M'ezard and M. Potters: “Statistical properties of stock order books: empirical results and models”, Quant. Fin., Vol. 2, (2002), pp. 251–256. http://dx.doi.org/10.1088/1469-7688/2/4/301[Crossref]
  • [23] A. Johansen and D. Sornette: “Modeling the stock market prior to large crashes”, Eur. Phys. J. B, Vol. 9, (1999), pp. 167–174. http://dx.doi.org/10.1007/s100510050752[Crossref]
  • [24] D. Sornette and A. Johansen: “Large financial crashes”, Physica A, Vol. 245, (1997), pp. 411–422l; Preprint: arXiv:cond-mat/9704127. http://dx.doi.org/10.1016/S0378-4371(97)00318-X[Crossref]
  • [25] A. Johansen, O. Ledoit and D. Sornette: “Crashes as critical points”, Int. J. Theor. Appl. Finance, Vol. 3, (2000), pp. 219–255. [Crossref]
  • [26] W-X. Zhou and D. Sornette: “Renormalization group analysis of the 2000-2002 anti-bubble in the US S&P 500 index: Explanation of the hierarchy of 5 crashes and prediction”, Physica A, Vol. 330, (2003), pp. 584–604; Preprint arXiv:physics/0301023. http://dx.doi.org/10.1016/j.physa.2003.09.022[Crossref]
  • [27] D. Sornette and W-X. Zhou: “The US 2000-2002 market descent: How much longer and deeper?”, Quant. Fin., Vol. 2, (2002), pp. 468–481. http://dx.doi.org/10.1088/1469-7688/2/6/306[Crossref]
  • [28] A. Johansen, O. Ledoit and D. Sornette: “Crashes as critical points”, Int. J. The. Appl. Finance, Vol. 3, (2000), pp. 219–255. [Crossref]
  • [29] W-X. Zhou and D. Sornette: “Evidence of a worldwide stock market log-periodic anti-bubble since mid-2000”, Physica A, Vol. 330, (2002), pp. 543–583; Preprint:arXiv:cond-mat/0212010. http://dx.doi.org/10.1016/j.physa.2002.12.001[Crossref]
  • [30] J. Laherrèere and D. Sornette: “Stretched exponential distributions in nature and economy: ”fat tails” with characteristic scales”, Eur. Phys. J. B, Vol. 2, (1998), pp. 525–539. http://dx.doi.org/10.1007/s100510050276[Crossref]
  • [31] A. Johansen and D. Sornette: “Critical ruptures”, Eur. Phys. J. B, Vol. 18, (2000), pp. 163–181; Preprint: arXiv:cond-mat/0003478. http://dx.doi.org/10.1007/s100510070089[Crossref]
  • [32] For many other articles of D. Sornette see also several issues of the journal Eur. Phys. J. B and search Preprint: http://xxx.lanl.gov/abs/cond-mat/.
  • [33] J-P. Bouchaud: “Power laws in economics and finance: some ideas from physics”, Quant. Fin., Vol. 1, (2001), pp. 105–112. http://dx.doi.org/10.1088/1469-7688/1/1/307[Crossref]
  • [34] For detailed information about NYSE shares and indices, URL: http://biz.yahoo.com/i/.
  • [35] For detailed information about ISE, URL: http://www.imkb.gov.tr/sirket/sirketler_y_2003.thm.

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Publication order reference


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