endogeneity

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Reflexivity by the Numbers Reflexivity by the Numbers
8 min read Keywords:  reflexivity, Hawkes process, branching ratio, endogeneity, Soros, Bouchaud, Sornette, flash crash, volatility clustering

Everyone agrees markets react to themselves. The question is how much. A statistical tool built for earthquakes turns that vague idea into a single number: the fraction of market activity that is the market reacting to its own moves rather than to outside news. The number turns out to be close to the level where a chain reaction would run away.