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JewishJournal.com

April 18, 2012

TAU creates financial alert

http://www.jewishjournal.com/finance/article/tau_creates_financial_alert_20120418

Researchers from Tel Aviv University, in collaboration with the Kiel Institute of World Economy in Germany, have developed a market “seismograph” — a new methodology that measures the interconnections between stock markets across the globe. The system has the potential to serve as an early-warning system and provide measures to manage and mitigate the spread of financial crisis.

Recently published in the journal PLOS ONE, the research investigates connections among individual major world markets by analyzing the simultaneous behavior of the stock market as a global whole.

“It has become both vital and critical to understand the relationships and dependencies among the world’s markets,” Tel Aviv doctoral student Dror Kenett said.

The researchers say their new method of understanding market connections could help each country predict when a financial crisis is imminent, allowing it to set up policies that will protect their own markets from becoming dangerously intertwined with struggling markets.

“With such high-frequency data, you can have almost real-time or short-time predictions on how economic information flows throughout the world,” Kenett said.

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