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

Maria P. Beccar-Varela, Maria C. Mariani, Osei K. Tweneboah, Ionut Florescu

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)162-171
Number of pages10
JournalPhysica A: Statistical Mechanics and its Applications
Volume474
DOIs
StatePublished - 15 May 2017

Keywords

  • Flash Crash event
  • High frequency financial data
  • Lehman Brothers collapse
  • Wavelets methodology

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