Econophysicists Develop and Test "Bubble Index"

eldavojohn writes "Oh if only we could identify the bubble markets as they appear, but with all the random variables, it would take some sort of econophysicist to build predictions for that! Well, a team has released a definition of a 'bubble index' that led them to make predictions of bubbles six months ago that would pop between then and now. The four bubbles they selected were the IBOVESPA Index of 50 Brazilian stocks, a Merrill Lynch Corporate Bond Index, the spot price of gold, and cotton futures. Two out of the four were bubbles, with Merrill Lynch being a bubble already popping and cotton continuing to soar into even bubblier status. Still, for your first try, 50% isn't bad. The team learned a lot of new things from the first run, revised their method, selected their predictions for the next six months, and sealed them. Only time will tell if they are truly onto predicting crashes."

Comments

Re:Self-fulfilling prophecies

[PopeRatzo]

Yes, you're right. I'm too hard on economists. It's sort of personal with me, I'm afraid.

There's a group of economists at my august institution who are highly respected in their field, yet are ass-hats to a man. They are quick to look down their noses at those of us in the humanities, yet give out PhDs to their favored grad students for work that any of our committees would bounce in a second. Just because they happen to hold positions in a department that's been a Nobel factory, they believe that rigor isn't as important as cachet. They believe Milton Friedman is a god, while the world suffers thanks to his fanciful notions of the "free market". Their pet theories tend to be faddish in the extreme. Coming from a post-modern critical theoretician, that's saying a lot.

On top of that, we have beaten them in 16-inch softball for the last six years running and they envy us because we have the best-looking females.

And they make a whole lot more money than I do, which is beyond insulting.