Interpreting financial market crashes as earthquakes: A new early warning system for medium term crashes

To create probability predictions of a market crash occurring over a certain period, the authors propose a modeling framework based on similarities between stock returns around a market crash and seismic activity around earthquakes. They construct an early warning system for future crash days, test it on the S&P 500 Index data during the financial crisis, and conclude that their model improves on existing volatility models.