
Fig. 3 shows the predictions of the future of the US S&P 500
index applying the so-called 'zero-phase' Weierstrass-type function,
which is another child for our general theory of imitation and
herding between investors. As for the previous figures, our theory
takes into account the competition between positive feedback (self-fulfilling
sentiment), negative feedbacks (contrariant behavior and fundamental/value
analysis) and inertia (everything takes time to adjust). This 'zero-phase'
Weierstrass-type function adds one additional ingredient: it attempts
to capture the existence of 'critical' points within the anti-bubble,
corresponding to accelerating waves of imitation within the large
scale unraveling of the herding anti-bubble. The continuous black
line is the forward prediction using all the data from Aug.9,2000
to May.16,2003, while the dashed black line is the retroactive
prediction using the data from Aug.9,2000 to Aug.24,2002. Both
lines are reconstructed and extrapolated from the fits to a six-term
zero-phase Weierstrass-type function. We also present the two previous
fits (red lines) performed on Aug.24,2002 (shown in Fig. 1) for
comparison. The blue dots show the daily price evolution from Aug.9,2000
to May.16,2003. The large (respectively small) ticks in the abscissa
correspond to January 1st (respectively to the first day of each
quarter) of each year.
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