dorsal/arxiv
View SchemaFear and its implications for stock markets
| Authors | Ingve Simonsen, Peter Toke Heden Ahlgren, Mogens H. Jensen, Raul Donangelo, Kim Sneppen |
|---|---|
| Categories | |
| ArXiv ID | physics/0609046 |
| URL | https://arxiv.org/abs/physics/0609046 |
| DOI | 10.1140/epjb/e2007-00125-4 |
Abstract
The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend. These empirical asymmetries predict that stock index drops are more common on a relatively short time scale than the corresponding raises. We present several empirical examples of such asymmetries. Furthermore, a simple model featuring occasional short periods of synchronized dropping prices for all stocks constituting the index is introduced with the aim of explaining these facts. The collective negative price movements are imagined triggered by external factors in our society, as well as internal to the economy, that create fear of the future among investors. This is parameterized by a ``fear factor'' defining the frequency of synchronized events. It is demonstrated that such a simple fear factor model can reproduce several empirical facts concerning index asymmetries. It is also pointed out that in its simplest form, the model has certain shortcomings.
{
"annotation_id": "ac85dbce-0fb9-4726-b2f1-18fd16635e29",
"date_created": "2026-03-02T18:01:11.159000Z",
"date_modified": "2026-03-02T18:01:11.159000Z",
"file_hash": "2cd1f4633ff80e578b560ff57efa0f6a49c1ec7271d40f005f1ccda6c72b2686",
"private": false,
"record": {
"abstract": "The value of stocks, indices and other assets, are examples of stochastic\nprocesses with unpredictable dynamics. In this paper, we discuss asymmetries in\nshort term price movements that can not be associated with a long term positive\ntrend. These empirical asymmetries predict that stock index drops are more\ncommon on a relatively short time scale than the corresponding raises. We\npresent several empirical examples of such asymmetries. Furthermore, a simple\nmodel featuring occasional short periods of synchronized dropping prices for\nall stocks constituting the index is introduced with the aim of explaining\nthese facts. The collective negative price movements are imagined triggered by\nexternal factors in our society, as well as internal to the economy, that\ncreate fear of the future among investors. This is parameterized by a ``fear\nfactor\u0027\u0027 defining the frequency of synchronized events. It is demonstrated that\nsuch a simple fear factor model can reproduce several empirical facts\nconcerning index asymmetries. It is also pointed out that in its simplest form,\nthe model has certain shortcomings.",
"arxiv_id": "physics/0609046",
"authors": [
"Ingve Simonsen",
"Peter Toke Heden Ahlgren",
"Mogens H. Jensen",
"Raul Donangelo",
"Kim Sneppen"
],
"categories": [
"physics.data-an",
"physics.soc-ph",
"q-fin.ST"
],
"doi": "10.1140/epjb/e2007-00125-4",
"title": "Fear and its implications for stock markets",
"url": "https://arxiv.org/abs/physics/0609046"
},
"schema_id": "dorsal/arxiv",
"source": {
"execution_id": "afd08ece-4111-4249-8eef-084b2e4c7972",
"id": "arXiv Dataset IDs",
"type": "Model",
"variant": "snapshot-2026-03-01",
"version": "0.1.0"
},
"user_id": 1000002
}