Recurrence, Laminarity and Market Stress: Testing RQA-Based Crisis Indicators During the COVID-19 Shock

Financial crises are usually identified through drawdowns, volatility and changes in returns, but these indicators do not fully describe changes in the underlying dynamical structure of markets. This study tests whether Laminarity, a measure derived from Recurrence Quantification Analysis, can provide a complementary indicator of financial market stress during the COVID-19 shock. Daily data for the Dow Jones Industrial Average, S&P 500 and NASDAQ Composite from 2018 to 2022 are analyzed using adjusted prices and log returns. Rolling-window Recurrence Quantification Analysis is applied across alternative window lengths and recurrence thresholds, and the resulting Laminarity measures are compared with conventional benchmarks including drawdown and rolling volatility. The results confirm that the COVID-19 crisis is clearly identified by conventional risk indicators, while Laminarity provides a more nuanced and parameter-sensitive signal. Price-based Laminarity generally increases during the COVID-19 stress period, suggesting a more persistent crisis trajectory, whereas return-based Laminarity produces mixed evidence, including some cases of Laminarity loss depending on index and window length. The findings indicate that Laminarity should not be interpreted as a universal or mechanical crash-warning signal, but as a complementary diagnostic measure that can help describe changes in market-regime structure during periods of acute stress.