Browsing by Author "Van Gysen, Michael"

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    Open Access
    The detection of phase transitions in the South African market
    (2016) Van Gysen, Michael; Mahomed, Obeid; Bosman, Petrus
    This dissertation details the performance of two specific trading strategies which are based on the Johansen-Ledoit-Sornette (JLS) model. Both positive and negative bubbles are modelled as a log-periodic power law (LPPL) ending in a finite time singularity. The stock prices of the constituents of the FTSE/JSE Top40 index are taken as inputs to the JLS model from 3 June 2003 to 31 August 2015. It is shown that for certain time horizons into the past, the JLS based trading strategies significantly outperform random trading strategies. However this result is highly dependent on how far the model looks into the past, and if the model is calibrating to positive or negative bubbles. The lack of research with regards to the "stylized facts" of the JLS model, specifically relating to the time horizon and type of bubble, poses a significant hurdle in correctly identifying a LPPL structure in stock prices. These core features of the JLS model were developed from a number of positive bubbles that built up over many years. The results suggest that these features may not apply over all time horizons, and for both types of bubbles.