Critical-point behaviour in self-organizing systems: the September 1999 Athens earthquake and Stock Market correction

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Published: Jan 1, 2007
DOI: https://doi.org/10.12681/bgsg.16881
Keywords:
Complex systems Earthquake prediction Econophysics Stock Market Bubbles
A. Tzanis
Department of Geophysics - Geothermy, University of Athens
Abstract

A quorum of observational and theoretical evidence indicates that seismogenesis is a critical phenomenon culminating with a large event that corresponds to some critical point: large earthquakes are preceded by the self-organization of the fault network and power-law acceleration of the seismic release rates. The stock market is not very different: the (interaction of the traders is usually irreversible and determines the value of the stock, which determines the actions of other traders etc. Thus, the stock market becomes a self-organizing system and exhibits strong analogies with other self-organizing systems, such as earthquakes. Positive feed-back is also important and may lead to trend-chasing and rapid escalation of stock price. There is ample evidence that market crashes and large corrections are often preceded by speculative bubbles with power law acceleration of the market price. In diabolic coincidence, both such crises were observed in Athens during the September of 1999. On 7/9 a moderate (M5.9) but destructive earthquake; around 22/9 the Athens Stock Exchange rally of the past few months crashed. Both phenomena were preceded by characteristic power-law acceleration, respectively in crustal deformation and market growth. Two very different complex dynamic systems are shown to exhibit similar collective behaviour, pointing out the apparent universality of natural order.

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  • Geophysics and Seismology
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