Dynamics of a financial market index after a crash
- Authors: Lillo, F.; Mantegna, R.
- Publication year: 2004
- Type: Articolo in rivista (Articolo in rivista)
- OA Link: http://hdl.handle.net/10447/21641
We discuss the statistical properties of index returns in a financial market just after a major market crash. The observed non-stationary behavior of index returns is characterized in terms of the exceedances over a given threshold. This characterization is analogous to the Omori law originally observed in geophysics. By performing numerical simulations and theoretical modelling, we show that the non-linear behavior observed in real market crashes cannot be described by a GARCH(1,1) model. We also show that the time evolution of the Value at Risk observed just after a major crash is described by a power-law function lacking a typical scale.