The Implications of Catastrophe Theory for Stock Market Forecasting

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Author	Ramona Birau
ISSN	2307-2466
On Pages	360-363
Volume No.	2
Issue No.	5
Issue Date	August 01, 2020
Publishing Date	August 01, 2020
Keywords	Catastrophe Theory, stock market, disequilibrium, discontinuities

Abstract

This paper aims to study a controversial issue such as the implications of Catastrophe Theory for stock markets forecasting. Stock markets are extremely unpredictable and complicated, so it's difficult to believe that their chaotic behavior can be classified into a specific pattern. In general, the concept of stock market is characterized by dramatically movements, nonlinearity, uncertainty, anomalies and cycles of evolution. Catastrophe Theory is the study of sudden changes in a system, which in this case is represented by the stock market that results from smooth and insignificant changes in those factors that determine the equilibrium state of this system. Thus, Catastrophe Theory explains in particular sudden changes from one equilibrium state to another. In other words, Catastrophe Theory has established a new level of understanding regarding the concept of stock market.

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