Detecting speculative bubbles in an IT-intensive stock market

2003 ◽  
Vol 27 (2) ◽  
pp. 166-189 ◽  
Author(s):  
Juha Junttila
Keyword(s):  
Stock Market ◽  
Speculative Bubbles

Modeling Financial Bubbles and Market Crashes

2017 ◽  
Author(s):  
Didier Sornette
Keyword(s):  
Stock Market ◽  
Hazard Rate ◽  
Market Price ◽  
Imitative Behavior ◽  
Rational Model ◽  
Basic Principles ◽  
Market Prices ◽  
Speculative Bubbles ◽  
Financial Bubbles ◽  
Market Crashes

This chapter considers two versions of a rational model of speculative bubbles and stock market crashes. According to the first version, stock market prices are driven by the crash hazard that may increase sometimes due to the collective behavior of “noise traders.” The second version assumes the opposite: the crash hazard is driven by prices that may soar sometimes, again due to investors' speculative or imitative behavior. The chapter first provides an overview of what a model is before discussing the basic principles of model construction in finance. It then describes the basic ingredients of the two models of speculative bubbles and market crashes, along with the main properties of the risk-driven model. It also examines how imitation and herding drive the crash hazard rate and concludes with an analysis of the price-driven model, how imitation and herding drive the market price, and how the price return drives the crash hazard rate.

Bubble footprints in the Malaysian stock market: are they rational?

2014 ◽  
Vol 22 (3) ◽  
pp. 223-236 ◽  
Author(s):  
Gilbert V. Nartea ◽  
Muhammand A. Cheema
Keyword(s):  
Stock Market ◽  
Emerging Market ◽  
Duration Dependence ◽  
Test Results ◽  
Data Set ◽  
Content Type ◽  
Speculative Bubbles ◽  
Rational Bubbles ◽  
Alternative Measures ◽  
Investor Behaviour

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.

Rational speculative bubbles in the stock market: the case of Amman Stock Exchange

2021 ◽  
Vol 1 (1) ◽  
pp. 1
Author(s):  
Usama Fendi ◽  
Bassam Mohammad Maali ◽  
Muhannad Ahmad Atmeh
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Speculative Bubbles ◽  
Amman Stock Exchange

Rational Speculative Bubbles in the Thai Stock Market: Econometric Tests and Implications

2007 ◽  
Vol 10 (01) ◽  
pp. 1-13 ◽  
Author(s):  
Sethapong Watanapalachaikul ◽  
Sardar M. N. Islam
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Emerging Market ◽  
Hazard Model ◽  
Investment Planning ◽  
Efficient Operation ◽  
Crisis Period ◽  
Speculative Bubbles ◽  
Emerging Stock Markets ◽  
Econometric Tests

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.

Bubbles, Crises, and Crashes in Emergent Markets

2017 ◽  
Author(s):  
Didier Sornette
Keyword(s):  
Hong Kong ◽  
Stock Market ◽  
Emerging Markets ◽  
Latin American ◽  
Speculative Bubbles ◽  
Russian Stock Market ◽  
International Events

This chapter examines bubbles, crises, and crashes in emergent markets, including six Latin American stock market indices (Mexico, Peru, Argentina, Brazil, Venezuela, and Chile) and six Asian stock market indices (Hong Kong, Philippines, Thailand, Indonesia, Malaysia, and Korea). It also considers the correlation between markets following major international events. After providing an overview of speculative bubbles in emerging markets, the chapter discusses the methodology of the study on the Latin American and Asian markets. It then describes the Russian stock market and concludes with an analysis of the implications of the experiences of emergent markets for mitigations of bubbles, crises, and crashes.

scholarly journals Non-linear Speculative Bubbles in the Pakistani Stock Market

1995 ◽  
Vol 34 (1) ◽  
pp. 25-41 ◽  
Author(s):  
Ehsan Ahmed ◽  
J. Barkley Rosser Jr.
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Complex Dynamics ◽  
Linear Structure ◽  
Walk Test ◽  
Switching Model ◽  
Speculative Bubbles ◽  
Stock Indices ◽  
Non Linear ◽  
Bds Test

Since 1987 many stock markeIs of the world have experienced volatility. This bas been true of many emerging stock markeIs. Our study of daily stock lIllI1'ket data from Pakistan between June 1987 and May 1993 finds the results to be consistent with the impression of great volatility and unpredictability thought to be common in such emerging markets. We used the VAR technique to estimaIe a "presumed" fundamental on stock indices using lagged first differences of natural logs of daily exchange rates and stock indices. We used the Hamilton switching model and associated Walk test to see if such speculative trends were present. We were significantly unable to rule them out. We then tested for ARCH effects, whose presence we failed to Ieject. We then used ARCHgenerated residuals to apply the BDS test of general non-linear structure. We failed to reject the lack of such non-linear structure quite significantly. Thus, the Pakistani stock market during the period of study seems to have exhibited quite complex dynamics, along with apparendy strong trends that may indicate the presence of speculative bubbles. This bas many important implications for Pakistani as well as other emerging markets.

scholarly journals Detecting and Date-Stamping Rational Bubbles in Asset Price: An Empirical Investigation in the Tunisian Stock Market

2019 ◽  
Vol 11 (8) ◽  
pp. 91
Author(s):  
Siwar Mehri Helali
Keyword(s):  
Stock Market ◽  
Unit Root ◽  
Stock Price ◽  
Empirical Investigation ◽  
Asset Price ◽  
Unit Root Tests ◽  
Monthly Data ◽  
Empirical Application ◽  
Speculative Bubbles ◽  
Rational Bubbles

This study tests the existence of periodically collapsing speculative bubbles in the Tunisian stock market. We use the Phillips, Wu, and Yu (2011) and Phillips, Shi, and Yu (2015) approaches, based on right-tailed unit root tests, in order to explore the existence and to date-stamp the origination and termination of bubbles. An empirical application was conducted in the Tunisian stock market, using monthly data on stock price-dividend ratio, for the period running from January 2004 to December 2014. The empirical findings provide evidence for the existence of exuberance in the Tunisian stock market over the period and date-stamp its origination and collapse.

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