Aftershock prediction for high-frequency financial markets’ dynamics

The occurrence of aftershocks following a major financial crash manifests the critical dynamical response of financial markets. Aftershocks put additional stress on markets, with conceivable dramatic consequences. Such a phenomenon has been shown to be common to most financial assets, both at high and low frequency. Its present-day description relies on an empirical characterization proposed by Omori at the end of 1800 for seismic earthquakes. We point out the limited predictive power in this phenomenological approach and present a stochastic model, based on the scaling symmetry of financial assets, which is potentially capable to predict aftershocks occurrence, given the main shock magnitude. Comparisons with S&P high-frequency data confirm this predictive potential. Fulvio Baldovin Dipartimento di Fisica, Sezione INFN and Sezione CNISM Università di Padova, Via Marzolo 8, I-35131 Padova, Italy e-mail: [email protected] Francesco Camana Dipartimento di Fisica Università di Padova, Via Marzolo 8, I-35131 Padova, Italy e-mail: [email protected] Michele Caraglio Dipartimento di Fisica Università di Padova, Via Marzolo 8, I-35131 Padova, Italy e-mail: [email protected] Attilio L. Stella Dipartimento di Fisica, Sezione INFN and Sezione CNISM Università di Padova, Via Marzolo 8, I-35131 Padova, Italy e-mail: [email protected] Marco Zamparo Dipartimento di Fisica, Sezione INFN and Sezione CNISM Università di Padova, Via Marzolo 8, I-35131 Padova, Italy; HuGeF, Via Nizza 52, 10126 Torino, Italy e-mail: [email protected]