Market and Economic Regulation Periodicity: A Feature that Allows Prevention and Regulation

Abstract

Problem statement: This study addressed the essential questions of non linear financial flows forecasting and prevention regarding the means of periodicity. Approach: We implemented some new computational tools to weigh up the presence of periodicity in 10 years financial price time series. The data consists of NYSE-Euronext listed corporations’ closing prices and East-Asian, North-American and European markets indexes closing prices. Results: Empirical evidence put forward that the tools allow considering the periodicity plus a forecasting side effect for the next months. The lengths of the cycles are determined for indexes and assets with strong disparity between the two categories. Conclusion: Extensively, the results open the road to determine structural changes in time series by allowing the calculation of the fundamental frequencies. It introduces some concepts from physics and discusses their potential usefulness in financial economics. This shows the way to detect financial and economic extreme events (burst of bubbles, companies’ failures, markets or sectors’ recessions) as to prevent them.