Possible Early Warning Sign for Market Crashes

From Wired comes this:

Complexity researchers who study the behavior of stock markets may have identified a signal that precedes crashes. They say the telltale sign is a measure of co-movement, or the likelihood of stocks to move in the same direction. When a market is healthy, co-movement is low. But in the months and years before a crash, co-movement seems to grow.

It continues:

“The financial crisis has shown that mainstream economic theories have limitations that need to be overcome,” said Dirk Helbing of the Swiss Federal Institute of Technology, who specializes in modeling crowd behavior. “Economic systems have become much more complex, and complex systems have certain features — cascading effects, systemic shifts. This calls for new theoretical approaches.”

When will major publications (like Wired), that always love to reveal “new thinking”, learn that the strategies that take advantage of crashes — already exist. Surprise: trend following.

Tagged with: , , , , , ,
Posted in Trend Following
One comment on “Possible Early Warning Sign for Market Crashes
  1. DGDye says:

    Their prediction doesn’t matter…according to Nostradamus the Planet X Nibiru will collide with Earth in 2012. This prediction is further corroborated by the Mayan calendar and Glen Beck…with the end of the world as we know it, commodities should do well and George Soros will rule us all.

Leave a Reply

Michael Covel Books

Underground Insights

Subscribe now to free email newsletter and get latest blog posts, podcast episodes and special offers delivered to your in box:
Go.

Pricing for trend following systems, risk management, trader psychology training and black swan strategies. Absolute return systems and education for new traders and established pros. Thousands of clients across 70+ countries. Testimonials.

The Trend Following™ podcast with Michael Covel. Listen now on iTunes and Android. Top authors and traders plus alternative commentary. 2.4M+ listens across 182+ countries & territories.

Free Video

One small town guy's trend following experience sent to your home. Get your free DVD delivered immediately and be inspired.

Trend Trading