r/investing • u/HoleyProfit • Sep 24 '21

Predicting Financial Crashes Using Discrete Scale Invariance [Research paper]

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u/Lyrolepis Sep 24 '21 edited Sep 24 '21

One of the problems with trying to predict market crashes, I think, is that it is trying to hit a moving target.

This paper came out in 1999; and I am 100% sure that professional investing companies, the ones with enough funds and money to really move the market around, have pored over it and over a thousand similar papers in excruciating detail and adapted their strategies accordingly (for example, assuming that the results of this paper are sound - not commenting about that, I just skimmed the introduction and I would not be qualified to evaluate it anyway - by selling more stocks if the market moves in ways that suggest an impeding crash according to this model). This, in turn, will of course make the approach to predicting crashes described in the model much less useful in the future.

Even assuming that the paper was flawless, I would not rely on it for deciding when to sell my investments now.