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The theory of the so called Dragon-Kings, esp. by Didier Sornette (ETH Zürich), basically states that financial crises and crashes are predictable (contrary to the theory of black swans).

The following paper gives an overview (see esp. section 5, p. 20f. for predictability):
Dragon-Kings: Mechanisms, Statistical Methods and Empirical Evidence by Didier Sornette, Guy Ouillon

My question
Do you know any software, tools, Excel sheets and/or preferably R code/packages with which the predictability of Dragon-Kings can be tested?

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+1 just for linking to paper with most statistically improbable phrase of the week, namely "Dragon-kings due to unsustainable transient herding in grand canonical minority games". –  SlowLearner Jul 13 '13 at 9:34
    
I flipped through the paper and found it to be utter "humbug". Nowhere have the authors established nor presented a statistical study that would support that there is any reliable way to forecast extreme events. While I disagree with Taleb in many ways I would say he is spot on in claiming black swans cannot be predicted but only subsequently managed. No earthquake (as of today) can be reliably predicted nor a financial crisis. For each guy who claimed he pinpointed the day the market put in a top there are 20 guys who did so before and got burned. But of course one should never stop dreaming –  Matt Wolf Jul 14 '13 at 13:48
    
@MattWolf: Yes and no: In general I am with you in being überskeptical yet this guy from ETH Zürich (!) regularly publishes encrypted forecasts of crashes on Arxiv and decryptes them to proof that his method works. See e.g. his TED talk: youtube.com/watch?v=C_eFjLZqXt8 - there are also many Google references to be found. –  vonjd Jul 14 '13 at 19:07
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He encrypts it because people accused him of being the reason markets fell after he published the forecast (= self fulfilling prophecy). And I don't believe it at face value either - this is why I want to conduct experiments of my own and this is why I posted the question in the first place. I am a permasceptic like you are! –  vonjd Jul 15 '13 at 7:45
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Sornette has a book Why Stock Markets Crash: Critical Events in Complex Financial Systems. I've largely stood with Taleb's thinking on this for sometime, but looking at things like multi-fractals has begun to make me reconsider whether we may develop the ability to do this. (Taleb claims to have collaborated a with Mandelbrot in his last years to try to do some of this). Sornette seems like a sincere guy, just not convinced he's nailed it yet. –  Jagra Jul 16 '13 at 13:27

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