Progress Curves and the Prediction of Significant Market Events

Abstract

Progress curves have been used to model the evolution of a wide range of human activities – from manufacturing to cancer surgery. In each case, the time to complete a given challenging task is found to decrease with successive repetitions, and follows an approximate power law. Recently, it was also employed in connection with the prediction of the escalation of fatal attacks by insurgent groups, with the insurgency “progressing” by continually adapting, while the opposing force tried to counter-adapt. In the present work, we provide the first application of progress curves to financial market events, in order to gain insight into the dynamics underlying significant changes in economic markets, such as stock indices and the currency exchange rate and also examine their use for eventual prediction of such extreme market events.