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Bubble, critical zone and the crash of Royal Ahold

2004; Elsevier BV; Volume: 346; Issue: 3-4 Linguagem: Inglês

10.1016/j.physa.2004.08.021

1873-2119

Gerrit Broekstra, Didier Sornette, Wei‐Xing Zhou,

Financial Risk and Volatility Modeling

We find that the seed of the 2002/03 crisis of the Dutch supermarket giant AHOLD was planted in 1996. We have adapted Weidlich's theory of opinion formation to describe the formation of buy or sell decisions among investors, based on a competition between the mechanisms of herding and of personal opinion opposing the herd. Using our identification of a “critical zone” starting in mid-1997 describing the maturation of a systemic instability forewarning of an inevitable crash fueled by raising expectations of investors to maintain strong herding pressures, our study opens the possibility of developing early warning signals but also suggests to top management ways of dealing with the coming crisis.