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Why Stock
Markets Crash: Critical Events in Complex Financial
Systems by Didier
Sornette
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- Hardcover: 456 pages ;
Dimensions (in inches): 1.32 x 9.44 x 6.52
- Publisher: Princeton Univ Pr;
; (January 2003)
- ISBN: 0691096309
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Book
Description
The scientific study of complex
systems has transformed a wide range of disciplines in recent
years, enabling researchers in both the natural and social
sciences to model and predict phenomena as diverse as
earthquakes, global warming, demographic patterns, financial
crises, and the failure of materials.
In this book,
Didier Sornette boldly applies his varied experience in these
areas to propose a simple, powerful, and general theory of how,
why, and when stock markets crash.
Most attempts to explain market failures seek to pinpoint
triggering mechanisms that occur hours, days, or weeks before
the collapse.
Sornette proposes a radically different view: the
underlying cause can be sought months and even years before the
abrupt, catastrophic event in the build-up of cooperative
speculation, which often translates into an accelerating rise of
the market price, otherwise known as a "bubble."
Anchoring his sophisticated, step-by-step analysis in
leading-edge physical and statistical modeling techniques, he
unearths remarkable insights and some predictions--among them,
that the "end of the growth era" will occur around
2050.
Sornette probes major historical precedents, from the
decades-long "tulip mania" in the Netherlands that
wilted suddenly in 1637 to the South Sea Bubble that ended with
the first huge market crash in England in 1720, to the Great
Crash of October 1929 and Black Monday in 1987, to cite just a
few.
He concludes that most explanations other than cooperative
self-organization fail to account for the subtle bubbles by
which the markets lay the groundwork for catastrophe.
Any investor or investment professional who seeks a
genuine understanding of looming financial disasters should read
this book.
Physicists, geologists, biologists, economists, and others
will welcome Why Stock Markets Crash as a highly original
"scientific tale," as Sornette aptly puts it, of the
exciting and sometimes fearsome--but no longer quite so
unfathomable--world of stock markets.
From
the Inside Flap
"This is a most fascinating book
about an intriguing but also a controversial topic. It is
written by an expert in a very straightforward style and is
illustrated by many clear figures.
Why
Stock Markets Crash will surely raise scientific interest in
the emerging new field of econophysics." (Cars H. Hommes,
Director of the Center for Nonlinear Dynamics in Economics and
Finance, University of Amsterdam)
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