Evidence of a Worldwide Stock Market Log-Periodic Anti-Bubble Since Mid-2000

TL;DR

This paper identifies a synchronized worldwide anti-bubble in stock markets starting around August 2000, characterized by a log-periodic power law decline, indicating global market interconnectedness and feedback-driven pessimism.

Contribution

It provides the first comprehensive analysis of 38 global stock indices, revealing a synchronized anti-bubble phenomenon starting in 2000 with a specific mathematical structure.

Findings

21 out of 38 indices exhibit anti-bubble behavior.

Anti-bubbles started around August 2000 across multiple markets.

Global synchronization suggests increased market globalization.

Abstract

Following our previous investigation of the USA Standard and Poor index anti-bubble that started in August 2000, we analyze thirty eight world stock market indices and identify 21 anti-bubble. An ``anti-bubble'' is defined as a self-fulfilling decreasing price created by positive price-to-price feedbacks feeding overall pessimism and negative market sentiment further strengthened by inter-personal interactions. We mathematically characterize anti-bubbles by a power law decrease of the price (or of the logarithm of the price) as a function of time and by decelerating/expanding log-periodic oscillations. The majority of European and Western stock market indices as well as other stock indices exhibit practically the same log-periodic power law anti-bubble structure as found for the USA S&P500 index. These anti-bubbles are found to start approximately at the same time, August 2000, in all these markets. This shows a remarkable degree of synchronization worldwide. The descent of the worldwide stock markets since 2000 is thus an international event, suggesting the strengthening of globalization.