Visualizing the log-periodic pattern before crashes

Abstract:We present a method for visualizing the pattern which we believe to be a precursor signature of financial crashes (or ruptures). The log-periodicity of the pattern is investigated through the envelope function technique. Three periods of the Dow Jones Industrial Average (DJIA) are investigated: 1982-1987, 1992-1997 and 1993-1998. The presence of a rupture in the end of 1998 is outlined from data taken before the end of August 1998.