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Econophysicists Develop and Test “Bubble Index”

June 2nd, 2010 06:07 admin Leave a comment Go to comments

eldavojohn writes “Oh if only we could identify the bubble markets as they appear but with all the random variables, it would take some sort of econophysicist to build predictions for that! Well, a team has released a definition of a ‘bubble index’ that lead them to make predictions of bubbles sixth months ago that would pop between then and now. The four bubbles they selected were the IBOVESPA Index of 50 Brazilian stocks, a Merrill Lynch Corporate Bond Index, the spot price of gold and cotton futures. Two out of the four were bubbles with Merrill Lynch being a bubble already popping and cotton continues to soar into even bubblier status. Still, for your first try, fifty percent isn’t bad. The team learned a lot of new things from this first run, revised their method, selected their predictions for the next sixth months and sealed them. Only time will tell if they are truly on to predicting crashes.”

Source: Econophysicists Develop and Test “Bubble Index”

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