The world is addicted to ranking: everything, from the reputation of scientists, journals, and universities to purchasing decisions is driven by measured or perceived differences between them. Here, we analyze empirical data capturing real time ranking in a number of systems, helping to identify the universal characteristics of ranking dynamics. We develop a continuum theory that not only predicts the stability of the ranking process, but shows that a noise-induced phase transition is at the heart of the observed differences in ranking regimes. The key parameters of the continuum theory can be explicitly measured from data, allowing us to predict and experimentally document the existence of three phases that govern ranking stability.
On December 16 th , 2011, Zynga, the well-known social game developing company went public. This event followed other recent IPOs in the world of social networking companies, such as Groupon or Linkedin among others. With a valuation close to 7 billion USD at the time when it went public, Zynga became one of the biggest web IPOs since Google. This recent enthusiasm for social networking companies raises the question whether they are overvalued. Indeed, during the few months since its IPO, Zynga showed significant variability, its market capitalization going from 5.6 to 10.2 billion USD, hinting at a possible irrational behavior from the market. To bring substance to the debate, we propose a two-tiered approach to compute the intrinsic value of Zynga. First, we introduce a new model to forecast its user base, based on the individual dynamics of its major games. Next, we model the revenues per user using a logistic function, a standard model for growth in competition. This allows us to bracket the valuation of Zynga using three different scenarios: 3.4, 4.0 and 4.8 billion USD in the base case, high growth and extreme growth scenario respectively. This suggests that Zynga has been overpriced ever since its IPO. Finally, we propose an investment strategy (dated April 19 th , 2012 on the arXive), which is based on our diagnostic of a bubble for Zynga and how this herding / bubbly sentiment can be expected to play together with two important coming events (the quarterly financial result announcement around April 26 th , 2012 followed by the end of a first lock-up period around April 30 th , 2012). On the long term, our analysis indicates that Zynga's price should decrease significantly. The paper ends with a post-mortem analysis added on May 24 th , 2012, just before going to press, showing that we have successfully predicted the downward trend of Zynga. Since April 27 th , 2012, Zynga dropped 25%.
We show that the log-periodic power law singularity model (LPPLS), a mathematical embodiment of positive feedbacks between agents and of their hierarchical dynamical organization, has a significant predictive power in financial markets. We find that LPPLS-based strategies significantly outperform the randomized ones and that they are robust with respect to a large selection of assets and time periods. The dynamics of prices thus markedly deviate from randomness in certain pockets of predictability that can be associated with bubble market regimes. Our hybrid approach, marrying finance with the trading strategies, and critical phenomena with LPPLS, demonstrates that targeting information related to phase transitions enables the forecast of financial bubbles and crashes punctuating the dynamics of prices.
On December 16 th , 2011, Zynga, the well-known social game developing company went public. This event followed other recent IPOs in the world of social networking companies, such as Groupon or Linkedin among others. With a valuation close to 7 billion USD at the time when it went public, Zynga became one of the biggest web IPOs since Google. This recent enthusiasm for social networking companies raises the question whether they are overvalued. Indeed, during the few months since its IPO, Zynga showed significant variability, its market capitalization going from 5.6 to 10.2 billion USD, hinting at a possible irrational behavior from the market. To bring substance to the debate, we propose a two-tiered approach to compute the intrinsic value of Zynga. First, we introduce a new model to forecast its user base, based on the individual dynamics of its major games. Next, we model the revenues per user using a logistic function, a standard model for growth in competition. This allows us to bracket the valuation of Zynga using three different scenarios: 3.4, 4.0 and 4.8 billion USD in the base case, high growth and extreme growth scenario respectively. This suggests that Zynga has been overpriced ever since its IPO. Finally, we propose an investment strategy (dated April 19 th , 2012 on the arXive), which is based on our diagnostic of a bubble for Zynga and how this herding / bubbly sentiment can be expected to play together with two important coming events (the quarterly financial result announcement around April 26 th , 2012 followed by the end of a first lock-up period around April 30 th , 2012). On the long term, our analysis indicates that Zynga's price should decrease significantly. The paper ends with a post-mortem analysis added on May 24 th , 2012, just before going to press, showing that we have successfully predicted the downward trend of Zynga. Since April 27 th , 2012, Zynga dropped 25%.
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