Standard Deviation Correlation Variation as a Measure of an Impending Market Crash

32 Pages Posted: 7 Dec 2008 Last revised: 31 May 2009

See all articles by Sidharta Chatterjee

Sidharta Chatterjee

Andhra University, Department of Social Work

Date Written: October 25, 2008

Abstract

This paper investigates the events that run up to the current global rout of financial distress evolving into a full blown stock market crash across the globe. Here, we summarize the episodes with the aid of statistical methods employed to study the sequence of events that lead to the current turmoil. Our approach is from a different viewpoint that has yielded substantial information regarding the sequences using parameters for volatility assumptions from statistical outputs as a measure of standard deviations under current settings. We have shown that the modeled behavior patterns of indices substantiated clinical inferences and path prognostic features that correlated with the kinematics of indicial movements. The cross-sectional model that we have used attempts to assess the market behavior, before and after the current crisis with empirical specifications thereafter which ascertained the effects of changing volatility levels as a diagnostic feature impounding a market crash. We also find that our volatility assumptions are effectual.

Keywords: Standard Deviation, Stock Market Crash, Stock Market Bubble, Volatility, Mean Reversion

JEL Classification: C1, C10

Suggested Citation

Chatterjee, Sidharta, Standard Deviation Correlation Variation as a Measure of an Impending Market Crash (October 25, 2008). Available at SSRN: https://ssrn.com/abstract=1312205 or http://dx.doi.org/10.2139/ssrn.1312205

Sidharta Chatterjee (Contact Author)

Andhra University, Department of Social Work ( email )

Andhra University
Waltair
Visakhapatnam, Andhra Pradesh
India

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