Mimicry among stocks can predict stock market crashes
(PhysOrg.com) -- Since early October 2008, when the Dow Jones Industrial Average began its drop that reached a low point the following March, many questions have been raised - particularly about what caused the crash and if it could have been predicted and somehow prevented. Some possible answers involve market volatility, changes in regulations, bank failures, easy credit, or any combination of external influences and internal market dynamics. In a new study, research analysts have found another clue to stock market crashes: high levels of collective stock movements - or market mimicry - tend to precede crashes, which suggests that measuring the mimicry level of the market could provide significant advance warning of an impending stock market crash.
