| Issue |
SHS Web Conf.
Volume 65, 2019
The 8th International Conference on Monitoring, Modeling & Management of Emergent Economy (M3E2 2019)
|
|
|---|---|---|
| Article Number | 06006 | |
| Number of page(s) | 7 | |
| Section | Monitoring, Modeling, Forecasting and Preemption of Crisis in Socio-Economic Systems | |
| DOI | https://doi.org/10.1051/shsconf/20196506006 | |
| Published online | 29 May 2019 | |
Levy’s stable distribution for stock crash detecting
1
Kryvyi Rih State Pedagogical University, 54, Gagarina Ave, Kryvyi Rih, 50086, Ukraine
2
Kryvyi Rih Economic Institute of Kyiv National Economic University named after Vadym Hetman, 16, Medychna St., Kryvyi Rih, 50000, Ukraine
* Corresponding author: krivogame@gmail.com
In this paper we study the possibility of construction indicators-precursors relying on one of the most power-law tailed distributions - Levy’s stable distribution. Here, we apply Levy’s parameters for 29 stock indices for the period from 1 March 2000 to 28 March 2019 daily values and show their effectiveness as indicators of crisis states on the example of Dow Jones Industrial Average index for the period from 2 January 1920 to 2019. In spite of popularity of the Gaussian distribution in financial modeling, we demonstrated that Levy’s stable distribution is more suitable due to its theoretical reasons and analysis results. And finally, we conclude that stability α and skewness β parameters of Levy’s stable distribution which demonstrate characteristic behavior for crash and critical states, can serve as an indicator-precursors of unstable states.
© The Authors, published by EDP Sciences, 2019
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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