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In my opinion, an attempt to compare the real estate bubble in Japan,
which seriously overinflated the net worth of virtually every major
company, and forced the markets there to reconsider the basis for
valuation of every company, to the accounting tricks at a much smaller
number of companies in the US is seriously flawed.
It looks to me that this 'research' has only identified an apparent
similarity between the movements of the two markets in their respective
time frames, but the researchers have no clue why the apparent
similarity exists, and therefore have no real basis for postulating that
the relationship will continue. They are grasping at straws.
Shameful, really.
Regards
DanG
Gary Funck wrote:
>
> http://arxiv.org/abs/cond-mat/0209065
>
> The US 2000-2002 Market Descent: How Much Longer and Deeper?
> Authors: D. Sornette (CNRS-Univ. Nice and UCLA), W.-X. Zhou (UCLA)
> Comments: 15 pages + 3 tables + 13 figures
> Subj-class: Statistical Mechanics
>
> A remarkable similarity in the behavior of the US S&P500 index from 1996 to
> August 2002 and of the Japanese Nikkei index from 1985 to 1992 (11 years shift)
> is presented, with particular emphasis on the structure of the bearish phases.
> Extending a previous analysis of Johansen and Sornette [1999, 2000] on the
> Nikkei index ``anti-bubble'' based on a theory of cooperative herding and
> imitation working both in bullish as well as in bearish regimes, we demonstrate
> the existence of a clear signature of herding in the decay of the S&P500 index
> since August 2000 with high statistical significance, in the form of strong
> log-periodic components. We offer a detailed analysis of what could be the
> future evolution of the S&P500 index over the next two years, according to
> three versions of the theory: we expect an overall continuation of the bearish
> phase, punctuated by local rallies; we predict an overall increasing market
> until the end of the year 2002 or at the beginning of 2003 (first quarter); we
> predict a strong following descent (with maybe one or two severe up and downs
> in the middle) which stops during the first semester of 2004. After this strong
> minimum, the market is expected to recover. Beyond, our prediction horizon is
> made fuzzy by the possible effect of additional nonlinear collective effects
> and of a real departure from the anti-bubble regime. The similarities between
> the two stock market indices may reflect deeper similarities between the
> fundamentals of two economies which both went through over-valuation with
> strong speculative phases preceding the transition to bearish phases
> characterized by a surprising number of bad surprises (bad loans for Japan and
> accounting frauds for the US) sapping investors' confidence.
>
> PDF: http://arxiv.org/PS_cache/cond-mat/pdf/0209/0209065.pdf
>
> This precursor article gives the derivation of their model:
>
> A. Johansen and D. Sornette, Financial “anti-bubbles”: Log-periodicity in Gold
> and Nikkei
> collapses, Int. J. Mod. Phys. C 10(4), 563-575 (1999).
>
> Abstract: http://arxiv.org/abs/cond-mat/9901268
> PDF: http://xxx.lanl.gov/PS_cache/cond-mat/pdf/9901/9901268.pdf
>
>
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> ------------------------------------------------------------------------
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> Encoding: base64
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