Log-Periodic Power Law and Generalized Hurst Exponent Analysis in Estimating an Asset Bubble Bursting Time

Marcin Wątorek, Bartosz Stawiarski
2016 e-Finanse  
We closely examine and compare two promising techniques helpful in estimating the moment an asset bubble bursts. Namely, the Log-Periodic Power Law model and Generalized Hurst Exponent approaches are considered. Sequential LPPL fitting to empirical financial time series exhibiting evident bubble behavior is presented. Estimating the critical crash-time works satisfactorily well also in the case of GHE, when substantial "decorrelation" prior to the event is visible. An extensive simulation study
more » ... ve simulation study carried out on empirical data: stock indices and commodities, confirms very good performance of the two approaches.
doi:10.1515/fiqf-2016-0001 fatcat:dkndjudcefggdhyzynztve5o5y