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Author: David F. DeRosa
Publisher: CFA Institute Research Foundation
ISBN: 1952927110
Category : Business & Economics
Languages : en
Pages : 206
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Book Description
The presence of speculative bubbles in capital markets (an important area of interest in financial history) is widely accepted across many circles. Talk of them is pervasive in the media and especially in the popular financial press. Bubbles are thought to be found primarily in the stock market, which is our main interest, although bubbles are said to occur in other markets. Bubbles go hand in hand with the notion that markets can be irrational. The academic community has a great interest in bubbles, and it has produced scholarly literature that is voluminous. For some economists, doing bubble research is like joining the vanguard of a Kuhnian paradigm shift in economic thinking. Not so fast. If bubbles did exist, they would pose a serious challenge to neoclassical finance. Bubbles would contradict the ideas that markets are rational or work in an informationally efficient manner. That’s what makes the topic of bubbles interesting. This book reviews and evaluates the academic literature as well as some popular investment books on the possible existence of speculative bubbles in the stock market. The main question is whether there is convincing empirical evidence that bubbles exist. A second question is whether the theoretical concepts that have been advanced for bubbles make them plausible. The reader will discover that I am skeptical that bubbles actually exist. But I do not think I or anyone else will ever be able to conclusively prove that there has never been a bubble. From studying the literature and from reading history, I find that many famous purported bubbles reflect inaccurate history or mistakes in analysis or simply cannot be shown to have existed. In other instances, bubbles might have existed. But in each of those cases, there are credible rational explanations. And good evidence exists for the idea that even if bubbles do exist, they are not of great importance to understanding the stock market.
Author: David F. DeRosa
Publisher: CFA Institute Research Foundation
ISBN: 1952927110
Category : Business & Economics
Languages : en
Pages : 206
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Book Description
The presence of speculative bubbles in capital markets (an important area of interest in financial history) is widely accepted across many circles. Talk of them is pervasive in the media and especially in the popular financial press. Bubbles are thought to be found primarily in the stock market, which is our main interest, although bubbles are said to occur in other markets. Bubbles go hand in hand with the notion that markets can be irrational. The academic community has a great interest in bubbles, and it has produced scholarly literature that is voluminous. For some economists, doing bubble research is like joining the vanguard of a Kuhnian paradigm shift in economic thinking. Not so fast. If bubbles did exist, they would pose a serious challenge to neoclassical finance. Bubbles would contradict the ideas that markets are rational or work in an informationally efficient manner. That’s what makes the topic of bubbles interesting. This book reviews and evaluates the academic literature as well as some popular investment books on the possible existence of speculative bubbles in the stock market. The main question is whether there is convincing empirical evidence that bubbles exist. A second question is whether the theoretical concepts that have been advanced for bubbles make them plausible. The reader will discover that I am skeptical that bubbles actually exist. But I do not think I or anyone else will ever be able to conclusively prove that there has never been a bubble. From studying the literature and from reading history, I find that many famous purported bubbles reflect inaccurate history or mistakes in analysis or simply cannot be shown to have existed. In other instances, bubbles might have existed. But in each of those cases, there are credible rational explanations. And good evidence exists for the idea that even if bubbles do exist, they are not of great importance to understanding the stock market.
Author: John C. Coffee
Publisher: Oxford University Press
ISBN: 0195364554
Category : Business & Economics
Languages : en
Pages : 562
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Book Description
Author: Matthias Salge
Publisher: Springer Science & Business Media
ISBN: 3642591817
Category : Business & Economics
Languages : en
Pages : 270
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Book Description
3 On the Economic Relevance of Rational Bubbles 79 3. 1 Capital markets . . . . . . . . . 80 3. 1. 1 Efficient capital markets 86 3. 1. 2 Rational bubbles on capital markets. 93 3. 1. 3 Economic caveats . 103 3. 2 Foreign exchange markets 109 3. 3 Hyperinflation. . . . . . . 117 4 On Testing for Rational Bubbles 123 4. 1 Indirect tests . . . . . . . . . 123 4. 1. 1 Variance bounds tests 124 4. 1. 2 Specification tests . . . 137 4. 1. 3 Integration and cointegration tests 140 4. 1. 4 Final assessment of indirect tests . 150 4. 1. 5 A digression: Charemza, Deadman (1995) analysis. 151 4. 2 Direct tests . . . . . . . . . . . . . . . . . . . . . . . . 157 4. 2. 1 Deterministic bubble in German hyperinflation. 158 4. 2. 2 Intrinsic bubbles on stock markets. 163 4. 2. 3 An econometric caveat . . . . . 168 4. 2. 4 Final assessment of direct tests 172 5 On the Explanatory Power of Rational Bubbles on the G- man Stock Market 175 5. 1 Data . . . . . . . 175 5. 2 Direct test for rational bubbles 181 5. 2. 1 Temporary Markovian bubbles. 184 5. 2. 2 Temporary intrinsic bubbles . . 193 ix 5. 2. 3 Permanent intrinsic bubbles 198 5. 3 A digression: Testing for unit roots 204 6 Concluding Remarks 215 A Results 221 A. 1 Temporary markovian bubbles. 221 A. 2 Temporary intrinsic bubbles . . 225 A. 3 Permanent intrinsic bubbles - Class 1 to 2 229 A. 4 Permanent intrinsic bubbles - Class 3 to 6 230 A. 5 Integration tests. . . . . . . . . . . . . . .
Author: James D. Hamilton
Publisher: Springer Science & Business Media
ISBN: 3642511821
Category : Business & Economics
Languages : en
Pages : 267
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Book Description
This book is a collection of state-of-the-art papers on the properties of business cycles and financial analysis. The individual contributions cover new advances in Markov-switching models with applications to business cycle research and finance. The introduction surveys the existing methods and new results of the last decade. Individual chapters study features of the U. S. and European business cycles with particular focus on the role of monetary policy, oil shocks and co movements among key variables. The short-run versus long-run consequences of an economic recession are also discussed. Another area that is featured is an extensive analysis of currency crises and the possibility of bubbles or fads in stock prices. A concluding chapter offers useful new results on testing for this kind of regime-switching behaviour. Overall, the book provides a state-of-the-art over view of new directions in methods and results for estimation and inference based on the use of Markov-switching time-series analysis. A special feature of the book is that it includes an illustration of a wide range of applications based on a common methodology. It is expected that the theme of the book will be of particular interest to the macroeconomics readers as well as econometrics professionals, scholars and graduate students. We wish to express our gratitude to the authors for their strong contributions and the reviewers for their assistance and careful attention to detail in their reports.
Author: Ron Insana
Publisher: HarperBusiness
ISBN: 9780060084622
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
Plummeting stock prices. Decimated 401(k) accounts. Shocking corporate scandals. Thus is the beginning of the twenty-first century. The boundless prosperity of the 1990s is now a remnant of history. With the turn of the millennium came a national reversal of fortune. In a period of under twelve months, the Nasdaq Composite index lost over 60 percent of its value, costing average Americans billions of dollars.If only we could've seen it coming. But perhaps it wasn't our lack of vision that blinded us to the approaching disaster. Perhaps all we needed to do was change our perspective. Too often we invest on whims and headlines, instincts and hot tips. We focus on the short-term possibilities and ignore the long-term picture. In this groundbreaking account, best-selling author and renowned CNBC anchor Ron Insana proves that we can profit from the best of times while preparing for the worst. Through an impressively illuminating investigation of financial market bubbles, manias, and trends, Insana shows how to predict confidently the seemingly erratic financial market booms and busts, getting in while the getting is good and getting out before we are gotten. We've all heard the adage: History repeats itself. In economic terms this truism could not be truer. Delving deep into the history of American investing, Insana’s enlightening study charts both well-known and widely overlooked events, proving definitively that the ups and downs of financial markets follow astonishingly similar patterns. Bubbles replicate those before them, trends imitate other trends, and the cycle repeats itself time and again. With keen insight, Insana, one of the world's top business journalists, will teach you how to recognize key signs and indicators so that you can determine when a bubble is forming, how long it will continue growing, and at what point it's going to burst. Too often, the public is the last in and the last out of the game. We lose money because we react to the decisions of others rather than anticipating fads on our own. Insana's eye-opening investigation will teach you how to stop following the herd and start finding your own way to investment success. Drawing on concrete evidence from the past to forecast the real-world changes of the future, this fascinating study paves the path for more secure, more dependable, and more profitable investing. It's your money.
Author: Robert J. Shiller
Publisher: MIT Press
ISBN: 9780262691512
Category : Business & Economics
Languages : en
Pages : 486
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Book Description
Market Volatility proposes an innovative theory, backed by substantial statistical evidence, on the causes of price fluctuations in speculative markets. It challenges the standard efficient markets model for explaining asset prices by emphasizing the significant role that popular opinion or psychology can play in price volatility. Why does the stock market crash from time to time? Why does real estate go in and out of booms? Why do long term borrowing rates suddenly make surprising shifts? Market Volatility represents a culmination of Shiller's research on these questions over the last dozen years. It contains reprints of major papers with new interpretive material for those unfamiliar with the issues, new papers, new surveys of relevant literature, responses to critics, data sets, and reframing of basic conclusions. Included is work authored jointly with John Y. Campbell, Karl E. Case, Sanford J. Grossman, and Jeremy J. Siegel. Market Volatility sets out basic issues relevant to all markets in which prices make movements for speculative reasons and offers detailed analyses of the stock market, the bond market, and the real estate market. It pursues the relations of these speculative prices and extends the analysis of speculative markets to macroeconomic activity in general. In studies of the October 1987 stock market crash and boom and post-boom housing markets, Market Volatility reports on research directly aimed at collecting information about popular models and interpreting the consequences of belief in those models. Shiller asserts that popular models cause people to react incorrectly to economic data and believes that changing popular models themselves contribute significantly to price movements bearing no relation to fundamental shocks.
Author: Harold L. Vogel
Publisher: Springer
ISBN: 3319715283
Category : Business & Economics
Languages : en
Pages : 508
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Book Description
Economists broadly define financial asset price bubbles as episodes in which prices rise with notable rapidity and depart from historically established asset valuation multiples and relationships. Financial economists have for decades attempted to study and interpret bubbles through the prisms of rational expectations, efficient markets, and equilibrium, arbitrage, and capital asset pricing models, but they have not made much if any progress toward a consistent and reliable theory that explains how and why bubbles (and crashes) evolve and can also be defined, measured, and compared. This book develops a new and different approach that is based on the central notion that bubbles and crashes reflect urgent short-side rationing, which means that, as such extreme conditions unfold, considerations of quantities owned or not owned begin to displace considerations of price.
Author: Harold L. Vogel
Publisher: Cambridge University Press
ISBN: 1316101576
Category : Business & Economics
Languages : en
Pages : 471
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Book Description
Despite the thousands of articles and the millions of times that the word 'bubble' has been used in the business press, there still does not appear to be a cohesive theory or persuasive empirical approach with which to study 'bubble' and 'crash' conditions. This book presents a plausible and accessible descriptive theory and empirical approach to the analysis of such financial market conditions. It advances such a framework through application of standard econometric methods to its central idea, which is that financial bubbles reflect urgent short side rationed demand. From this basic idea, an elasticity of variance concept is developed. It is further shown that a behavioral risk premium can probably be measured and related to the standard equity risk premium models in a way that is consistent with conventional theory.
Author: Tulip Mittal
Publisher: Notion Press
ISBN: 1685382630
Category : Business & Economics
Languages : en
Pages : 120
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Book Description
Things like ‘trends’ happen for a reason; maybe you start them and become buffeted in their sway. But what exactly unfolds when all of us seek to be a part of unique cultural phenomena that hold sway over the world? This book dissects socio-economic nuances of various fads and trends that we are surrounded by and happily engage with. The topics are not only chosen to inform readers about these fads but also make them aware of the economic factors that govern them. The book is a perfect way to develop analytical skills by inspiring readers to correlate something as fun and basic as a fad or a trend, with the practical, in-depth knowledge of a subject like economics.
Author: E. Ray Canterbery
Publisher: Austin Macauley Publishers
ISBN: 1528958527
Category : Business & Economics
Languages : en
Pages : 268
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Book Description
With incomparable wisdom, writing and analytical skills, and wit, world renowned economist E. Ray Canterbery traces the history of the major speculative episodes in the world economy over the last three centuries. He begins with Tulipmania and ends with bitcoin speculation in exposing the way in which normally sane people display reckless abandon in the pursuit of profit. Canterbery shows how our notoriously short financial memory is what creates the conditions for market collapse. Throughout, the market is considered sacrosanct, much to the regret of the losers. By recognizing certain signs and understanding what causes them we can guard against future collapses and have a better hold on the country’s (and our own) financial destiny.
