2003/12/27 by Wei‐Xing Zhou, W. -X. Zhou, D. Sornette +1
Economics, Econometrics and Finance · Physics and Astronomy · #Bond #Complex Systems and Time Series Analysis #Econometrics #Economics #Finance #Financial economics #Geography #Herding #Monetary economics #Opinion Dynamics and Social Influence #Physics #Predictive power #Stock (firearms) #Stock market #Theoretical and Computational Physics #Treasury #Yield curve #cond-mat.stat-mech #q-fin.ST
paper · pdf · doi:10.1016/j.physa.2004.02.009
published as Physica A 337, 586-608 (2004). · 26 Elsevier Latex pages including 11 eps figures (color online)
arxiv created 2003/12/27 · openalex publication_date 2004/03/06 · arxiv updated 2009/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
Using the descriptive method of log-periodic power laws (LPPL) based on a theory of behavioral herding, we use a battery of parametric and non-parametric tests to demonstrate the existence of an antibubble in the yields with maturities larger than 1 year since October 2000. The concept of ``antibubble'' describes the existence of a specific LPPL pattern that is thought to reflect collective herding effects. From the dependence of the parameters of the LPPL formula as a function of yield maturities and using lagged cross-correlation calculations between the S&P 500 and bond yields, we find strong evidence for the following causality: Stock Market → Fed Reserve (Federal funds rate) → short-term yields → long-term yields (as well as a direct and instantaneous influence of the stock market on the long-term yields). Our interpretation is that the FRB is ``causally slaved'' to the stock market (at least for the studied period), because the later is (taken as) a proxy for the present and future health of the economy.