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Journal articles on the topic 'Stock bubbles'

Author: Grafiati

Published: 4 June 2021

Last updated: 13 February 2022

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1

Andrade, Sandro C., Jiangze Bian, and Timothy R. Burch. "Analyst Coverage, Information, and Bubbles." Journal of Financial and Quantitative Analysis 48, no. 5 (October 2013): 1573–605. http://dx.doi.org/10.1017/s0022109013000562.

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AbstractWe examine the 2007 stock market bubble in China. Using multiple measures of bubble intensity for each stock, we find significantly smaller bubbles in stocks for which there is greater analyst coverage. We further show that the abating effect of analyst coverage on bubble intensity is weaker when there is greater disagreement among analysts. This suggests that, in line with resale option theories of bubbles, one channel through which analyst coverage may mitigate bubbles is by coordinating investors’ beliefs and thus reducing its dispersion. Stock turnover provides further evidence consistent with this particular information mechanism.

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2

Martin, Alberto, and Jaume Ventura. "Economic Growth with Bubbles." American Economic Review 102, no. 6 (October 1, 2012): 3033–58. http://dx.doi.org/10.1257/aer.102.6.3033.

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We develop a stylized model of economic growth with bubbles in which changes in investor sentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid schemes. These bubbles mitigate the effects of financial frictions. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. These transfers of resources improve economic efficiency thereby expanding consumption, the capital stock and output. When bubbly episodes end, there is a fall in consumption, the capital stock and output. We argue that the stochastic equilibria of the model provide a natural way of introducing bubble shocks into business cycle models. (JEL E22, E23, E32, E44, O41)

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3

Kho, Bong-Chan, and Jin-Woo Kim. "Who Drive the Rise and Fall of the Bubbles in Korean Stock Market?" Journal of Derivatives and Quantitative Studies 25, no. 4 (November 30, 2017): 591–622. http://dx.doi.org/10.1108/jdqs-04-2017-b0004.

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In this paper, we analyze the trading patterns of investors around the bubble events selected for stocks traded in Korean Stock Market from 1999 to 2013, whose holding period returns exceed 200% for 250 trading days prior to the event and then drop subsequently below -50% thereafter for the next 250 trading days. We examine whether individual investors, commonly known as noise traders, drive the bubbles, and whether institutional investors and foreign investors, known as informed traders, take an arbitrage position to shrink the pricing errors or ride the bubbles to maximize their profits. We also examine whether individual investors suffer losses due to their disposition effect even after the bubble bursts. Major findings of this paper are as follows : First, we find that individual investors are actually shown to drive the bubbles in our full sample, whereas the burst of the bubbles are largely driven by institutional investors and foreign investors. In particular, it is shown for large-cap stocks that foreign investors take the lead in raising the price at an early stage of the bubbles and then institutional investors follow them until the bubble peak point. Second, for mid-cap and large-cap stocks, institutional investors are found to ride the bubbles from about 75 days prior to the bubble peak point, when foreign investors reverse their trades and start selling to realize profits. Such bubble riding behavior of institutional investors is consistent with the synchronization risk model of Abreu and Brunnermeier (2002, 2003), where it is optimal for informed traders to ride the bubbles until all of informed traders start selling at the bubble peak point. Third, individual investors are found to suffer losses as they keep buying the bubble stocks even after the bubble bursts due to their disposition effect.

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4

Su, Chi-Wei, Lu Liu, and Kai-Hua Wang. "Do Bubble Behaviors Exist in Chinese Film Stocks?" SAGE Open 10, no. 4 (October 2020): 215824402098330. http://dx.doi.org/10.1177/2158244020983300.

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This article investigates bubbles in the Chinese film industry to reveal the industry’s boom and bust process that influences employment, citizen’s livelihoods, and even economic growth. We adopt the film stock index to reflect the industry’s trajectory and employ the generalized and backward sup augmented Dickey–Fuller tests to detect bubble periods. Empirical results indicate that there are three positive bubbles in 2007, 2013, and 2015, indicating that the film market continues to expand after temporary frustrations. Meanwhile, one negative bubble is found in 2019, which demonstrates that the bubble’s negative impacts persist and the film industry is still having problems such as declining industrial output. Economic growth, film quality, and industrial policies are common factors for all bubbles. The global financial crisis, capital in- and outflows, internet giants’ entry and sky-high remuneration are reasons for certain bubble behaviors. Hence, market practitioners should actively recognize bubbles and observe their evolution, which will favor industrial stabilization. A perfect legal system, moderate industrial policies, a competitive market environment, and other measures are needed to confront the opportunities and challenges.

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5

Li, Ge, Ming Xiao, Xionghui Yang, Ying Guo, and Shengyi Yang. "Research on multiple bubbles in China’s multi-level stock market." PLOS ONE 16, no. 8 (August 2, 2021): e0255476. http://dx.doi.org/10.1371/journal.pone.0255476.

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Financial bubbles have always been a topic of long-term concern for economists. Understanding bubble phenomenon and dating the period of bubbles in real time can provide an early warning diagnosis for financial bubbles and help regulatory authorities to control it and maintain market order. The generalized sup ADF (GSADF) and backward sup ADF (BSADF) tests with flexible window width can effectively detect and date periodically collapsing bubbles in real time. Based on the financial present value model, this paper applies right-tail recursive ADF test to test multiple bubbles in China’s multi-level stock market. Unlike the other researches in China, the ratios of the real stock prices’ natural logarithm to the real dividends’ natural logarithm are used for our testing instead of stock price index. Empirical results show that there are 8 bubbles in the Main-Board Market, 6 bubbles in the Small and Medium Enterprises Board (SMEs), and 4 bubbles in the Growth Enterprise Market (GEM). These bubbles are liquidity-driven and presuppose a loose credit cycle, with the exception of bubbles in 2014–2015. The frequent emergence of bubbles in a short time indicates that China’s stock market is still emerging market. In addition, frequent fluctuations imply there is a serious “herd effect” and a lack of monitoring mechanism for bubble risk. This study not only enrich the real-time dynamic research on periodical bubbles of China’s stock market, but also provide an empirical reference for investors’ investment choices, financial decisions of listed companies and warning mechanism of regulatory authorities.

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6

Watanapalachaikul, Sethapong, and Sardar M. N. Islam. "Rational Speculative Bubbles in the Thai Stock Market: Econometric Tests and Implications." Review of Pacific Basin Financial Markets and Policies 10, no. 01 (March 2007): 1–13. http://dx.doi.org/10.1142/s0219091507000921.

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Understanding of factors like economic fundamentals or bubbles that normally determine the returns of stock in any emerging market such as the Thai stock market is essential for academic, investment planning and public policy reasons. An empirical study of the existence of rational speculative bubbles in the Thai stock market is undertaken by using the Weibull Hazard model. The conventional Weibull Hazard model is used as a benchmark model for other speculative bubble models. Empirical results suggest the presence of rational speculative bubbles in the Thai stock market, especially during the pre-crisis period. While rational speculative bubbles were not present immediately after the post-crisis period, some were observed a few years after the crisis. A possible explanation for such a result concerning rational speculative behaviour and bubbles in the emerging stock markets could be attributed to the presence of market imperfections in emerging stock markets, requiring institutional and policy developments to ensure efficient operation of the stock market.

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7

Girdzijauskas, Stasys, and Dalia Štreimikienė. "APPLICATION OF LOGISTIC MODELS FOR STOCK MARKET BUBBLES ANALYSIS." Journal of Business Economics and Management 10, no. 1 (March 31, 2009): 45–51. http://dx.doi.org/10.3846/1611-1699.2009.10.45-51.

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The article deals with economic bubbles and analyses their possible causes and tools for the prediction of such bubbles development. An economic bubble is the commonly used term for an economic cycle that is characterized by a rapid expansion followed by a dramatic crash. While some bubbles happen naturally as a part of the economic cycle, some also occur as a result of investor exuberance and serve as correctives. These typically happen in securities, stock markets, real estate and various other business sectors because of certain changes in the way key players conduct business. The well‐known and widely discussed bubbles in asset markets were analysed and compared trying to define the main features, causes and signals of such bubbles creation: Dotcom, Telecom, Health South Corporation, NASDAQ, etc. These bubbles were analysed in the article by applying the logistic growth model allowing to predict the bubbles creation as a result of growth satiation in the conditions of limited resources.

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8

Bengtsson, Thomas, and Michael J. Seiler. "Stock Market Bubbles." Journal of Wealth Management 4, no. 3 (October 31, 2001): 50–57. http://dx.doi.org/10.3905/jwm.2001.320420.

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9

Meng, Sun, Hairui Fang, and Dongping Yu. "Fractal Characteristics, Multiple Bubbles, and Jump Anomalies in the Chinese Stock Market." Complexity 2020 (September 16, 2020): 1–12. http://dx.doi.org/10.1155/2020/7176598.

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To consider the jump problem of the Chinese stock market, this paper takes the CSI 300 Index from April 2005 to November 2015 as the research object, uses the rescaled range analysis (R/S analysis) method to examine the fractal characteristics of the Chinese stock market in the past ten years, and deduces the possibility of multiple bubbles in the Chinese stock market. Based on this, combined with the log-periodic power law (LPPL) model, the stock market bubbles are identified in different periods. The results show that China’s stock market has some anomalies in terms of positive bubbles, negative bubbles, and reverse bubbles, as well as the cross occurrence of reverse-negative bubbles. Besides, through a comparison with the major foreign stock markets, it is found that the fluctuation range of the Chinese stock market is much larger than that of the Dow Jones Industrial Average and the FTSE 100 indices in the same period and there are also more types of multibubbles, which is a connotative anomaly that makes the Chinese stock market different from other major stock markets. Furthermore, the bubble phenomenon in the Chinese stock market during the periods of 2005/4–2007/10 and 2015/6–2015/11 is studied, and it is found that there is a jump anomaly in the Chinese stock market. Finally, based on the above empirical analysis and the current state of the stock market, this paper provides some suggestions for improving the mechanism of the Chinese stock market.

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10

V. Nartea, Gilbert, and Muhammand A. Cheema. "Bubble footprints in the Malaysian stock market: are they rational?" International Journal of Accounting & Information Management 22, no. 3 (July 29, 2014): 223–36. http://dx.doi.org/10.1108/ijaim-11-2013-0063.

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Purpose – The purpose of this paper is to re-examine the presence of rational speculative bubbles in the Malaysian stock market in light of contradictory results presented in previous studies. Design/methodology/approach – The authors use descriptive statistics, explosiveness tests and the duration dependence test. They use an expanded data set that encompasses at least two alleged bubble episodes addressing a significant limitation of previous studies. The authors use both monthly and weekly returns addressing concerns about the sensitivity of duration dependence test results to the use of monthly versus weekly returns, as well as a battery of alternative measures of returns. Findings – The authors detect bubble footprints but they do not appear to be rational. They found no evidence of rational speculative bubbles over the sample period regardless of whether monthly or weekly returns was used. The authors suggest that if there were bubbles in the Malaysian stock market, they might have been caused by irrational investor behaviour. The authors’ results do not support the suggestion that the duration dependence test is sensitive to the use of monthly versus weekly returns. Practical implications – Despite the absence of rational bubbles in the Malaysian stock market, the faint bubble footprints detected still suggest caution for investors, as the authors cannot categorically rule out the presence of irrational bubbles. Originality/value – This paper clarifies conflicting results of previous studies. It also contributes to the literature on bubble testing by presenting new evidence from an emerging market refuting the claim that duration dependence test results are sensitive to the use of either weekly or monthly returns.

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11

LYNCH, CHRISTOPHER, and BENJAMIN MESTEL. "LOGISTIC MODEL FOR STOCK MARKET BUBBLES AND ANTI-BUBBLES." International Journal of Theoretical and Applied Finance 20, no. 06 (September 2017): 1750038. http://dx.doi.org/10.1142/s0219024917500388.

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Log-periodic power laws often occur as signatures of impending criticality of hierarchical systems in the physical sciences. It has been proposed that similar signatures may be apparent in the price evolution of financial markets as bubbles and the associated crashes develop. The features of such market bubbles have been extensively studied over the past 20 years, and models derived from an initial discrete scale invariance assumption have been developed and tested against the wealth of financial data with varying degrees of success. In this paper, the equations that form the basis for the standard log-periodic power law model and its higher extensions are compared to a logistic model derived from the solution of the Schröder equation for the renormalization group with nonlinear scaling function. Results for the S&P 500 and Nikkei 225 indices studied previously in the literature are presented and compared to established models, including a discussion of the apparent frequency shifting observed in the S&P 500 index in the 1980s. In the particular case of the Nikkei 225 anti-bubble between 1990 and 2003, the logistic model appears to provide a better description of the large-scale observed features over the whole 13-year period, particularly near the end of the anti-bubble.

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12

LAU, EE LENG, G. K. RANDOLPH TAN, and SHAHIDUR RAHMAN. "ASSESSING PRE-CRISIS FUNDAMENTALS IN SELECTED ASIAN STOCK MARKETS." Singapore Economic Review 50, no. 02 (October 2005): 175–96. http://dx.doi.org/10.1142/s0217590805001962.

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In the folklore of emerging markets, there is a popular belief that bubbles are inevitable. In this paper, our objective is to estimate a state-space model for rational bubbles in selected Asian economies with the aid of the Kalman Filter. For each economy, we derive a possible picture of the bubble formation process that is implied by the state-space formulation. The estimation is based on the rational valuation formula for stock prices. Our results provide a possible way of defining the presence of rational bubbles in the stock markets of Taiwan, Singapore, Korea, and Malaysia.

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13

Nazir, Mian Sajid, Javeria Mahmood, Fizza Abbas, and Ayesha Liaqat. "Do rational bubbles exist in emerging markets of SAARC?" Journal of Economic and Administrative Sciences 36, no. 2 (June 24, 2019): 163–82. http://dx.doi.org/10.1108/jeas-09-2018-0102.

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Purpose The upsurge of globalization has made investors cautious toward investing decisions, and, resultantly, sophisticated techniques of forecasting and analyzing the stock markets have emerged. Particularly, this trend has gained momentum in emerging economies. One such trend is to overcome the investing risks associated with formation of rational bubbles. Bubbles are formed when asset prices inflate to a very high level temporarily, and they ultimately burst. Investors may take advantage of this short-lived phenomenon and gain high returns, but may also suffer as the entire investing value declines when the bubble bursts. The purpose of this paper is to identify rational bubbles in the emerging capital markets of South Asian region. Design/methodology/approach The monthly data have been obtained from June 1997 to February 2018 for Pakistan, Bombay, Dhaka and Colombo stock markets, and supremum-Augmented Dicky Fuller test developed by Phillips and Yu (2011) has been utilized to identify the rational bubbles. Findings The results revealed the presence of rational bubbles in South Asian equity markets. The current study is of significant nature for the facilitation of investors in future-making investing decisions concerning with the formation of rational bubbles. Originality/value Several studies have been conducted on stock markets of developed regions. Specific bubble episodes, which occurred previously, have helped the researchers and investors in gaining plenty of insights. A lot of studies have been conducted on the SAARC region as well. But they have used the conventional unit root test for bubble identification and not used as extensive data as, in this study, have been taken. This research is aimed to study equity prices of the four stock markets to establish the fact that if rational bubbles exist in the index, they are reflected in the returns or not.

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14

Rappoport, Peter, and Eugene N. White. "Was There a Bubble in the 1929 Stock Market?" Journal of Economic History 53, no. 3 (September 1993): 549–74. http://dx.doi.org/10.1017/s0022050700013486.

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In contrast to historical accounts of the boom and crash of the 1929 stock market, recent econometric studies have concluded that there were no bubbles in the American stock market over the past one hundred years. Examining the pricing of loans to stock brokers, we find information on the lenders' perceptions of the future course of stock prices in 1929. From this market, we extract an estimate of the bubble in stock prices. This bubble component contributes significantly to explain stock price behavior, even though standard cointegration tests suggest that there was no bubble in the market.

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15

Širůček, Martin. "Impact of money supply on stock bubbles." Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 61, no. 7 (2013): 2835–42. http://dx.doi.org/10.11118/actaun201361072835.

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This article focuses on the effect and implications of changes in money supply in the US on stock bubble rise on the US capital market, which is represented by the Dow Jones Industrial Average index. This market was chosen according to the market capitalization. The attention of the paper is drawn to issues – if according to the results of empirical analysis, the money supply is a significant factor which causes the bubbles and if during the time the significance and impact of this macroeconomic factor on stock index increase.

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16

JOHANSEN, ANDERS, and DIDIER SORNETTE. "BUBBLES AND ANTI-BUBBLES IN LATIN-AMERICAN, ASIAN AND WESTERN STOCK MARKETS: AN EMPIRICAL STUDY." International Journal of Theoretical and Applied Finance 04, no. 06 (December 2001): 853–920. http://dx.doi.org/10.1142/s0219024901001218.

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Twenty-one significant bubbles followed by large crashes or severe corrections in Latin-American and Asian stock markets are identified. We find that, with very few exceptions, these speculative bubbles can be quantitatively described by a rational expectation model of bubbles predicting a specific power law acceleration as well as so-called log-periodic geometric patterns. This model considerably extends the applicability of the rational expectation model of bubbles followed by crashes or severe corrections previously proposed for the major financial markets in the world, i.e. the USA and the foreign exchange markets. A comparison of the model predictions using the price and the logarithm of the price, respectively, furthermore indicates according to our model that such large downward movements in the markets are nothing but depletions of the preceding bubble thus bringing the market back towards equilibrium. In addition, a set of secondary stock markets are also shown to exhibit well-correlated "anti-bubbles" triggered by a rash of crises on emerging markets in early 1994. This suggests that smaller stock markets can weakly synchronize not only because of the over-arching influence of the US market, but also independent of the US market due to external factors such as the Asian crisis of 1994.

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Chang, Tsangyao, Chen-Min Hsu, and Mei-Chih Wang. "Bubbles During Covid-19 Period: Evidence from the United States Using the Generalized Sub ADF Test." HOLISTICA – Journal of Business and Public Administration 12, no. 1 (April 1, 2021): 49–56. http://dx.doi.org/10.2478/hjbpa-2021-0005.

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Abstract This study applies the generalized sub ADF (GSADF) tests to investigate whether bubbles exist in the United States markets over the period of 2015-2019, focusing on the COVID-19 period. We use daily Dow-Jones stock price indexes for the first time during the time period of 2015/1/7-2020/3/17. Empirical results demonstrate the existence of bubbles in the US stock market during some sub-sample time periods. Especially important, we find the third bubble begins from 2020/2/26 and grows gradually, not bursting until recently, a situation that is ongoing in the US market. Our results have important policy implications for investors who attempt to invest in the US stock market

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18

White, Eugene N. "Stock Market Bubbles? A Reply." Journal of Economic History 55, no. 3 (September 1995): 655–65. http://dx.doi.org/10.1017/s0022050700041681.

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Research in finance is guided by powerful intuitions from models of efficient markets. However, researchers have uncovered a number of puzzles that are not explained by these models. Such anomalies include the excess volatility of stock prices, the closed-end mutual fund paradox, and the mean reversion in stock prices that produces predictable returns for long holding periods.1 Whereas financial economists all recognize the existence of these puzzles, they disagree about how they can be explained. Robert J. Shiller argues, for example, that efficient-markets models cannot hope to explain these anomalies and looks to alternatives that incorporate fads.2 In contrast, John H. Cochrane believes that the puzzles can be explained by improved models of fundamentals.3

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Lehnert, Thorsten. "Fear and stock price bubbles." PLOS ONE 15, no. 5 (May 12, 2020): e0233024. http://dx.doi.org/10.1371/journal.pone.0233024.

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20

Narayan, Paresh Kumar, Sagarika Mishra, Susan Sharma, and Ruipeng Liu. "Determinants of stock price bubbles." Economic Modelling 35 (September 2013): 661–67. http://dx.doi.org/10.1016/j.econmod.2013.08.010.

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21

Miao, Jianjun, Pengfei Wang, and Lifang Xu. "Stock market bubbles and unemployment." Economic Theory 61, no. 2 (August 28, 2015): 273–307. http://dx.doi.org/10.1007/s00199-015-0906-7.

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Nneji, Ogonna. "Liquidity shocks and stock bubbles." Journal of International Financial Markets, Institutions and Money 35 (March 2015): 132–46. http://dx.doi.org/10.1016/j.intfin.2014.12.010.

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23

De Queiroz, Thiago Bergmann, Otávio Ribeiro De Medeiros, and José Carneiro da Cunha Oliveira Neto. "Evidências de bolhas especulativas na BOVESPA: uma aplicação do filtro de Kalman." Brazilian Review of Finance 9, no. 2 (July 8, 2011): 257. http://dx.doi.org/10.12660/rbfin.v9n2.2011.2667.

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The existence of bubbles in asset prices is a matter of great importance to governments and investors due to possible serious effects they may have on economies. In the case of shares, the presence of a price bubble can be seen by comparing prices and dividends in the long run. This study aimed to assess the occurrence of price bubbles in the Brazilian stock market, by comparing the IBOVESPA as price index and an index of dividends, built based on the methodology of IBOVESPA. The bubble was considered a unobserved state vector in a state-space model and was estimated using the Kalman filter. The results were compared with the standard present value model and intrinsic bubbles model (Froot e Obstfeld, 1991). Although the model establishes the presence of bubbles, the intrinsic bubbles model (Froot e Obstfeld, 1991) showed similar results with greater accuracy.

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Hu, Zongyi, and Chao Li. "New JLS-Factor Model versus the Standard JLS Model: A Case Study on Chinese Stock Bubbles." Discrete Dynamics in Nature and Society 2017 (2017): 1–15. http://dx.doi.org/10.1155/2017/8017510.

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In this paper, we extend the Johansen-Ledoit-Sornette (JLS) model by introducing fundamental economic factors in China (including the interest rate and deposit reserve rate) and the historical volatilities of targeted and US equity indices into the original model, which is a flexible tool to detect bubbles and predict regime changes in financial markets. We then derive a general method to incorporate these selected factors in addition to the log-periodic power law signature of herding and compare the prediction accuracy of the critical time between the original and the new JLS models (termed the JLS-factor model) by applying these two models to fit two well-known Chinese stock indices in three bubble periods. The results show that the JLS-factor model with Chinese characteristics successfully depicts the evolutions of bubbles and “antibubbles” and constructs efficient end-of-bubble signals for all bubbles in Chinese stock markets. In addition, the results of standard statistical tests demonstrate the excellent explanatory power of these additive factors and confirm that the new JLS model provides useful improvements over the standard JLS model.

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Czupryna, Marcin, and Paweł Oleksy. "Rational Speculative Bubbles in the Fine Wine Investment Market." Kwartalnik Kolegium Ekonomiczno-Społecznego. Studia i Prace 3, no. 3 (December 13, 2015): 159–72. http://dx.doi.org/10.33119/kkessip.2015.3.3.12.

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The paper focuses on detection of rational speculative bubbles in fine wineinvestment market. Our research was conducted using recursive tests. The chosenmethod additionally allowed us to set time frames for potential bubbles. Theresults have shown that speculative bubble episodes appeared between 2006–2007both in fine wine market and in most of selected traditional stock exchanges.However, only the fine wine market recorded the second wave of speculativebubbles between 2010–2011.

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Ahmed, Ehsan, J. Barkley Rosser Jr., and Jamshed Y. Uppal. "A Raging Bull or a Long-term Speculative Bubble? The Puzzling Case of the Karachi Stock Exchange." Pakistan Development Review 55, no. 2 (June 1, 2016): 79–93. http://dx.doi.org/10.30541/v55i2pp.79-93.

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The objective of the study is to examine possible presence of nonlinear speculative bubbles in the Karachi Stock Exchange (KSE). Bubbles are argued to exist when there are substantial deviations of market value from the estimated fundamental values. We estimate a series of fundamental values from a four variable Vector Autoregression Model (VAR) using the main KSE100 index along with measures of world stock prices, the Pakistani exchange rate, and the Pakistani short-term interest rate. Residuals of this estimated fundamental time series are then tested for possible speculative deviations using a Hamilton regime switching test and a rescaled range Hurst coefficient test, with a further test for nonlinearity beyond the ARCH effects using the BDS statistic. For all of these, we reject the null hypotheses of the absence of speculative bubbles and nonlinearities beyond ARCH in these series. While these results suggest the possible presence of such bubbles, we note methodological limits on proving that due to the problem of mis-specified fundamentals. We further discuss some characteristics of the regulatory environment that may make it especially susceptible to such phenomena and may be considered by the policy-makers for the attenuation of speculative and manipulative behaviour. Keywords: Bubble, Pakistan, Stock Market, Regime Switching, Rescaled Range Analysis, Nonlinearity

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PLATEN, ECKHARD, and RENATA RENDEK. "APPROXIMATING THE GROWTH OPTIMAL PORTFOLIO AND STOCK PRICE BUBBLES." International Journal of Theoretical and Applied Finance 23, no. 07 (November 2020): 2050048. http://dx.doi.org/10.1142/s021902492050048x.

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In practice, optimal portfolio construction for large stock markets has never been conclusively resolved because estimating the required means of returns with sufficient accuracy is a highly intractable task. By avoiding estimation, this paper approximates closely the growth optimal portfolio (GP) for the stocks of developed markets with a well-diversified, hierarchically weighted index (HWI). For stocks denominated in units of the HWI, their current value turns out to be strictly greater than their future expected values, which indicates the existence of stock price bubbles that could be systematically exploited for long-term asset management. It is shown that the HWI does not leave much room for significant performance improvements as proxy for the GP.

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Konovalova, М. E., O. Yu Kuzmina, V. Ya Vishnever, and S. Yu Salomatina. "Stock Market Crisis Identification as a Factor Ensuring Country’s Economic Security." SHS Web of Conferences 71 (2019): 03002. http://dx.doi.org/10.1051/shsconf/20197103002.

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The article reviews the issues of the economic security of the country from the standpoint of identification of financial crises. The essence and content of a financial crisis are given, characteristic traits of a stock market bubble as an integral part of a stock market crisis are singled out. Special emphasis is laid on the study of the existing methods of identification and measurement of bubbles. The authors analyze the modern stock market crises, describe the Russian stock market vulnerability factors. The article evaluates the possibility for the origination of a stock market crisis in Russia on the modern stage resulting in the creation of a multi-factor stock market bubble identification model. The authors justify proposals and recommendations for the elimination of the existing Russian stock market problems aimed at removal of the economic security threats of the country.

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29

McQueen, Grant, and Steven Thorley. "Bubbles, Stock Returns, and Duration Dependence." Journal of Financial and Quantitative Analysis 29, no. 3 (September 1994): 379. http://dx.doi.org/10.2307/2331336.

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Marathe, Achla, and Edward F. Renshaw. "Stock Market Bubbles—Some Historical Perspective." Journal of Investing 4, no. 4 (November 30, 1995): 63–73. http://dx.doi.org/10.3905/joi.4.4.63.

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31

Sampson, Michael. "New Eras and Stock Market Bubbles." Structural Change and Economic Dynamics 14, no. 3 (September 2003): 297–315. http://dx.doi.org/10.1016/s0954-349x(02)00054-1.

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Porter, David P., and Vernon L. Smith. "Stock market bubbles in the laboratory." Applied Mathematical Finance 1, no. 2 (December 1994): 111–28. http://dx.doi.org/10.1080/13504869400000008.

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Porter, David P., and Vernon L. Smith. "Stock Market Bubbles in the Laboratory." Journal of Behavioral Finance 4, no. 1 (March 2003): 7–20. http://dx.doi.org/10.1207/s15427579jpfm0401_03.

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Ikeda, Shinsuke, and Akihisa Shibata. "Fundamentals-dependent bubbles in stock prices." Journal of Monetary Economics 30, no. 1 (October 1992): 143–68. http://dx.doi.org/10.1016/0304-3932(92)90049-8.

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Miao, Jianjun, and Pengfei Wang. "Asset Bubbles and Credit Constraints." American Economic Review 108, no. 9 (September 1, 2018): 2590–628. http://dx.doi.org/10.1257/aer.20160782.

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We provide a theory of rational stock price bubbles in production economies with infinitely-lived agents. Firms meet stochastic investment opportunities and face endogenous credit constraints. They are not fully committed to repaying debt. Credit constraints are derived from incentive constraints in optimal contracts which ensure default never occurs in equilibrium. Stock price bubbles can emerge through a positive feedback loop mechanism and cannot be ruled out by transversality conditions. These bubbles command a liquidity premium and raise investment by raising the debt limit. Their collapse leads to a recession and a stock market crash. (JEL D25, E22, E32, E44, G12, G14)

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Pan, Wei-Fong. "HOW DOES THE MACROECONOMY RESPOND TO STOCK MARKET FLUCTUATIONS? THE ROLE OF SENTIMENT." Macroeconomic Dynamics 24, no. 2 (June 6, 2018): 421–46. http://dx.doi.org/10.1017/s1365100518000287.

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This study estimates the response of macroeconomic variables to stock market fluctuations in Japan and the United States. It emphasizes the economy's reaction to stock market bubbles and crashes. To do this, I propose a new way to identify bubbles and crashes by testing price-to-fundamental ratios using the newly developed trend-filtering approach. Regardless of the measures used, both countries' macroeconomy tends to respond positively to the positive shock of stock price. Asymmetric effects of the stock market are observed. Japan's macroeconomic variables, especially investment and industrial production, are more sensitive to market crashes, while those of the United States are more sensitive to stock bubbles. Finally, I provide evidence that market sentiment can affect the economy either directly or indirectly through the stock market.

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Lee, Hyang, and Jungyoung Park. "BUBBLE PREDICTION AND COMPARATIVE ANALYSIS OF EMERGING AND MATURE MARKETS." Finance & Accounting Research Journal 2, no. 1 (June 22, 2020): 22–31. http://dx.doi.org/10.51594/farj.v2i1.100.

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By analyzing the financial bubbles, it can be observed that every bubble burst causes financial turmoil and severe economic recession. The paper utilize the technical analysis indicators for providing warning conditions for predicting the stock market bubbles. The significance of the technical analysis indicators are that they can provide early warning system for financial crisis and can help in avoiding such problems. We applied the early warning technical indicators to the stock market of US, South Korea, Brazil, China, Germany, and Japan for the period of 1995 to 2018. We also made comparison of the bubble warning conditions of emerging markets and the mature markets. The standard bubble warning conditions include K value 90, Bias 10%, and RSI value of 90. Empirical results shows that mature market shows less degree of volatility and lowering the warning baseline can improve the accuracy of bubble predictions. Furthermore, results shows that mature markets bursting time is about 6 months while in emerging market, the time is reduced to only 3 months. These results also indicate that mature market has good antirisk ability compare to the emerging markets.

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CHEN, JING. "WHEN THE BUBBLE IS GOING TO BURST …" International Journal of Theoretical and Applied Finance 02, no. 03 (July 1999): 285–92. http://dx.doi.org/10.1142/s0219024999000169.

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There has been constant debate about the predictability of the security markets. We examine the relationship between the prices of a stock and its convertible bond during the Hong Kong stock market bubble of 1997 and its subsequent crash. We find that the price behavior of the share and the convertible bond not only gave a clear signal of the market reversal, but also the minimum range of the stock price change. This example offers concrete evidence that the market becomes highly predictable at times and gives us a chance to understand the relationship of the underlying stock and its derivatives during market bubbles.

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Pástor, Ľuboš, and Pietro Veronesi. "Technological Revolutions and Stock Prices." American Economic Review 99, no. 4 (August 1, 2009): 1451–83. http://dx.doi.org/10.1257/aer.99.4.1451.

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We develop a general equilibrium model in which stock prices of innovative firms exhibit “bubbles” during technological revolutions. In the model, the average productivity of a new technology is uncertain and subject to learning. During technological revolutions, the nature of this uncertainty changes from idiosyncratic to systematic. The resulting bubbles in stock prices are observable ex post but unpredictable ex ante, and they are most pronounced for technologies characterized by high uncertainty and fast adoption. We find empirical support for the model's predictions in 1830–1861 and 1992–2005 when the railroad and Internet technologies spread in the United States. (JEL G12, L86, L92, N21, N22, N71, N72)

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Engsted, Tom, Thomas Q. Pedersen, and Carsten Tanggaard. "The Log-Linear Return Approximation, Bubbles, and Predictability." Journal of Financial and Quantitative Analysis 47, no. 3 (February 13, 2012): 643–65. http://dx.doi.org/10.1017/s0022109012000191.

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AbstractWe study in detail the log-linear return approximation introduced by Campbell and Shiller (1988a). First, we derive an upper bound for the mean approximation error, given stationarity of the log dividend-price ratio. Next, we simulate various rational bubbles that have explosive conditional expectation, and we investigate the magnitude of the approximation error in those cases. We find that, surprisingly, the Campbell-Shiller approximation is very accurate even in the presence of large explosive bubbles. Only in very large samples do we find evidence that bubbles generate large approximation errors. Finally, we show that a bubble model in which expected returns are constant can explain the predictability of stock returns from the dividend-price ratio that many previous studies have documented.

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Chang, Tsangyao, Luis Gil-Alana, Goodness C. Aye, Rangan Gupta, and Omid Ranjbar. "Testing for bubbles in the BRICS stock markets." Journal of Economic Studies 43, no. 4 (September 12, 2016): 646–60. http://dx.doi.org/10.1108/jes-07-2014-0128.

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Purpose The purpose of this paper is to investigate whether there exist multiple bubbles in the Brazil, Russia, India, China and South Africa (BRICS) stock markets. Design/methodology/approach In this study, the authors apply the generalized sup Augmented Dickey-Fuller test, a new recursive test proposed by Phillips et al. (2015) and use monthly data on stock price-dividend ratio. Findings The empirical results indicate that there exist multiple bubbles in the stock markets of the BRICS. Further, the dates of the bubbles also correspond to specific events in the stock markets of these economies. This finding has important economic and policy implications. Originality/value The authors declare that this paper is original and has not been published by another journal previously.

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Brocato, Joe, Gerald P. Dwyer, and R. W. Hafer. "The Stock Market: Bubbles, Volatility, and Chaos." Southern Economic Journal 59, no. 3 (January 1993): 533. http://dx.doi.org/10.2307/1060292.

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Konovalova, Maria E., and Olga Yu Kuzmina. "INNOVATIVE MODEL OF STOCK BUBBLES EARLY IDENTIFICATION." Economics and innovation management 11, no. 4 (2019): 57–66. http://dx.doi.org/10.26730/2587-5574-2019-4-57-66.

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Park, Won-Am. "Stock Price, Dividends and Bubbles in Korea." Journal of Finance & Knowledge Studies 15, no. 2 (August 31, 2017): 33–53. http://dx.doi.org/10.38200/jfks.15.2.2.

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Gilchrist, Simon, Charles P. Himmelberg, and Gur Huberman. "Do stock price bubbles influence corporate investment?" Journal of Monetary Economics 52, no. 4 (May 2005): 805–27. http://dx.doi.org/10.1016/j.jmoneco.2005.03.003.

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Yu, Jung‐Suk, and M. Kabir Hassan. "Rational speculative bubbles in MENA stock markets." Studies in Economics and Finance 27, no. 3 (August 3, 2010): 247–64. http://dx.doi.org/10.1108/10867371011060054.

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Kaliva, Kasimir, and Lasse Koskinen. "Stock market bubbles, inflation and investment risk." International Review of Financial Analysis 17, no. 3 (June 2008): 592–603. http://dx.doi.org/10.1016/j.irfa.2007.03.004.

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Chen, Guojin, Lingling Chen, Yanzhen Liu, and Yuxuan Qu. "Stock price bubbles, leverage and systemic risk." International Review of Economics & Finance 74 (July 2021): 405–17. http://dx.doi.org/10.1016/j.iref.2021.03.017.

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Liu, Tung, Gray J. Santoni, and Courtenay C. Stone. "In Search of Stock Market Bubbles: A Comment on Rappoport and White." Journal of Economic History 55, no. 3 (September 1995): 647–54. http://dx.doi.org/10.1017/s002205070004167x.

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In a recent article in this JOURNAL, Peter Rappoport and Eugene N. White (hereafter R-W) conclude that, “while there is still room for skepticism [of the presence of a bubble in the boom and bust stock market of 1928/29], the traditional accounts of a bubble in the market cannot be so easily dismissed”.1 Their conclusion is not based on econometric evidence for a stock market bubble per Se. Instead, it is based solely on their interpretation of the widening spread between the interest rates on brokers’ loans (call and time loans collateralized by stocks and bonds) and other money market interest rates in 1928 and 1929.

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Strasek, Sebastjan, and Tadej Kelc. "IS U.S. TECHNOLOGY SECTOR IN A BUBBLE?" Herald of Ternopil National Economic University, Vol 16, No 4 (2017) (2017): 379–94. http://dx.doi.org/10.35774/jee2017.04.379.

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The paper is examines the issue if the U.S. technology sector is in the bubble. Our analysis is based on the study of relative indicators, especially on price-to-earnings ratio. We studied the last two historic bubbles and analyzed the current state on the U.S. stock market. We find that U.S. stock market is heavily overvalued, which can be argued with high values of the relative indicators compared to the historical average. Some of them indicate that market was valued higher only during the Great Depression in 1929 and during the technological bubble in 2000. Remarkably high values are the result of low interest rates and quantitative easing. The current expansive monetary policy is encouraging risky businesses and increasing margin debt. With potential abatement of tax rates and other measures of expansive fiscal politics, stock markets could reach even higher values.

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