Predicting trend reversals using market instantaneous state

摘要

Collective behaviors taking place in financial markets reveal strongly correlated states especially during a crisis period. A natural hypothesis is that trend reversals are also driven by mutual influences between the different stock exchanges. Using a maximum entropy approach, we find coordinated behavior during trend reversals dominated by the pairwise component. In particular, these events are predicted with high significant accuracy by the ensemble's instantaneous state. © 2014 Elsevier B.V. All rights reserved.