Université de Fribourg

Prediction accuracy and sloppiness of log-periodic functions

Brée, David S. ; Challet, Damien ; Peirano, Pier Paolo

In: Quantitative Finance, 2013, vol. 13, no. 2, p. 275-280

We show that log-periodic power-law (LPPL) functions are intrinsically very hard to fit to time series. This comes from their sloppiness, the squared residuals depending very much on some combinations of parameters and very little on other ones. The time of singularity that is supposed to give an estimate of the day of the crash belongs to the latter category. We discuss in detail why and how the...