Year of Graduation
Properties of Returns of Financial Indices at the Time of Anomalously Large Values of Their Markov Radius of Correlation
Applied Mathematics and Information Science
The work presents a research devoted to anomalies of Dow Jones index. We use the markov correlation radius (MCR) that estimates the relationship between returns at nearby times. In the paper anomalies are referred as risk reduction followed by a high value of the expected profitability and market fall probability increase. We have found some MCR ranges such that if index belongs to it that leads to the anomalies of both types. Thus, a large MCR corresponds to a high probability of collapse, while a lower one corresponds to the risk anomaly. Using MCR give an opportunity to identify approximately a quarter of the largest Dow Jones index crashes in the retrospect, by announcing an "alarm" for a short time before their happenings.