title: Index cohesive force analysis reveals that the US market became prone to systemic collapses since 2002.
abstract: BACKGROUND
  The 2007-2009 financial crisis, and its fallout, has strongly emphasized the need to define new ways and measures to study and assess the stock market dynamics.
  
  
  RESULTS
  The S&P500 dynamics during 4/1999-4/2010 is investigated in terms of the index cohesive force (ICF--the balance between the stock correlations and the partial correlations after subtraction of the index contribution), and the Eigenvalue entropy of the stock correlation matrices. We found a rapid market transition at the end of 2001 from a flexible state of low ICF into a stiff (nonflexible) state of high ICF that is prone to market systemic collapses. The stiff state is also marked by strong effect of the market index on the stock-stock correlations as well as bursts of high stock correlations reminiscence of epileptic brain activity.
  
  
  CONCLUSIONS
  The market dynamical states, stability and transition between economic states was studies using new quantitative measures. Doing so shed new light on the origin and nature of the current crisis. The new approach is likely to be applicable to other classes of complex systems from gene networks to the human brain.
authors.affiliation: School of Physics and Astronomy, Tel-Aviv University, Tel-Aviv, Israel.
authors.forename: Dror Y
authors.initials: DY
authors.lastname: Kenett
authors.forename: Yoash
authors.initials: Y
authors.lastname: Shapira
authors.forename: Asaf
authors.initials: A
authors.lastname: Madi
authors.forename: Sharron
authors.initials: S
authors.lastname: Bransburg-Zabary
authors.forename: Gitit
authors.initials: G
authors.lastname: Gur-Gershgoren
authors.forename: Eshel
authors.initials: E
authors.lastname: Ben-Jacob
mesh_terms: D004467:Economics; D007449:Investments; D014481:United States