Evidence of a worldwide stock market log-periodic anti-bubble since mid-2000

Following our investigation of the USA Standard and Poor index anti-bubble that started in August 2000 (Quant. Finance 2 (2002) 468), we analyze 38 world stock market indices and identify 21 “bearish anti-bubbles” and six “bullish anti-bubbles”. An “anti-bubble” is defined as a self-reinforcing price trajectory with self-similar expanding log-periodic oscillations. Mathematically, a bearish anti-bubble is characterize by a power law decrease of the price (or of the logarithm of the price) as a function of time and by expanding log-periodic oscillations. We propose that bearish anti-bubbles are created by positive price-to-price feedbacks feeding overall pessimism and negative market sentiment further strengthened by inter-personal interactions. Bullish anti-bubbles are here identified for the first time. The most striking discovery is that the majority of European and Western stock market indices as well as other stock indices exhibit practically the same log-periodic power law anti-bubble structure as found for the USA S&P500 index. These anti-bubbles are found to start approximately at the same time, August 2000, in all these markets. This shows a remarkable degree of worldwide synchronization. The descent of the worldwide stock markets since 2000 is thus an international event, suggesting the strengthening of globalization.