Rational Bubbles

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Rational Bubbles

Matthias Salge
Rational Bubbles Book PDF

Author : Matthias Salge
Publisher : Springer Science & Business Media
Page : 270 pages
File Size : 53,7 Mb
Release : 2012-12-06
Category : Business & Economics
ISBN : 9783642591815

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Rational Bubbles by Matthias Salge Pdf

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. . . . . . . . . . . . . . .

Bursting the Bubble: Rationality in a Seemingly Irrational Market

David F. DeRosa
Bursting the Bubble Rationality in a Seemingly Irrational Market Book PDF

Author : David F. DeRosa
Publisher : CFA Institute Research Foundation
Page : 206 pages
File Size : 42,8 Mb
Release : 2021-04-02
Category : Business & Economics
ISBN : 9781952927119

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Bursting the Bubble: Rationality in a Seemingly Irrational Market by David F. DeRosa Pdf

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.

Asset Price Bubbles

William Curt Hunter,George G. Kaufman,Michael Pomerleano
Asset Price Bubbles Book PDF

Author : William Curt Hunter,George G. Kaufman,Michael Pomerleano
Publisher : MIT Press
Page : 650 pages
File Size : 54,8 Mb
Release : 2005
Category : Business & Economics
ISBN : 0262582538

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Asset Price Bubbles by William Curt Hunter,George G. Kaufman,Michael Pomerleano Pdf

A study of asset price bubbles and the implications for preventing financial instability.

Housing Bubbles

Sergi Basco
Housing Bubbles Book PDF

Author : Sergi Basco
Publisher : Springer
Page : 98 pages
File Size : 47,8 Mb
Release : 2018-10-01
Category : Business & Economics
ISBN : 9783030005870

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Housing Bubbles by Sergi Basco Pdf

“This book provides an accessible, yet formal framework to understand how housing bubbles arise, their international dimension, their consequences, and ways to prevent them.” Òscar Jordà, University of California, Davis, USA “Basco’s analysis blends, in a very rigorous but enjoyable manner , state-of-the-art theory and historical examples, adding also a very timely and valuable set of policy orientations.” Óscar Arce, Director General, Banco de España, Madrid, Spain Booms and busts of house prices are a recurrent feature throughout history. This book provides a comprehensive overview of the origins and economic consequences of these housing bubbles. The book starts with a formal definition of asset price bubbles and a summary of the most famous episodes, before describing how economists have thought about asset price bubbles; specifically behavioral vs. rational interpretations. These theories are applied to the special case of housing and the same framework is used to explain the implications of financial globalization for capital flows and housing bubbles. After analyzing its origins, the economic consequences of housing bubbles for both households and firms are derived and documented. The final sections are devoted to discussing the effects of financial crises and explain how financial regulation could mitigate the emergence of future housing bubbles. Case studies of the recent housing bubbles in the United States and Spain are also featured in the book. This book will be of value to advanced undergraduate macroeconomic courses, as well as researchers in international economics and macroeconomics and policy makers.

Financial Market Bubbles and Crashes, Second Edition

Harold L. Vogel
Financial Market Bubbles and Crashes Second Edition Book PDF

Author : Harold L. Vogel
Publisher : Springer
Page : 477 pages
File Size : 50,9 Mb
Release : 2018-08-16
Category : Business & Economics
ISBN : 9783319715285

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Financial Market Bubbles and Crashes, Second Edition by Harold L. Vogel Pdf

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.

Bubbles and Crashes in Experimental Asset Markets

Stefan Palan
Bubbles and Crashes in Experimental Asset Markets Book PDF

Author : Stefan Palan
Publisher : Springer Science & Business Media
Page : 179 pages
File Size : 41,6 Mb
Release : 2009-10-03
Category : Business & Economics
ISBN : 9783642021473

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Bubbles and Crashes in Experimental Asset Markets by Stefan Palan Pdf

This book describes a laboratory experiment designed to test the causes and properties of bubbles in financial markets and explores the question whether it is possible to design markets which avoid such bubbles and crashes. In the experiment, subjects were given the opportunity to trade in a stock market modeled after the seminal work of Smith et al. (1988). To account for the increasing importance of online betting sites, subjects were also allowed to trade in a digital option market. The outcomes shed new light on how subjects form and update their expectations, placing special emphasis on the bounded rationality of investors. Various analytical bubble measures found in the literature are collected, calculated, classified and presented for the first time. The very interesting new bubble measures "Dispersion Ratio", "Overpriced Transactions" and "Underpriced Transactions" are developed, making the book an important step towards the research goal of preventing bubbles and crashes in financial markets.

Asset Price Bubbles

Ms.Anna Scherbina
Asset Price Bubbles Book PDF

Author : Ms.Anna Scherbina
Publisher : International Monetary Fund
Page : 41 pages
File Size : 40,7 Mb
Release : 2013-02-21
Category : Business & Economics
ISBN : 9781475515299

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Asset Price Bubbles by Ms.Anna Scherbina Pdf

Why do asset price bubbles continue to appear in various markets? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. Unlike the standard rational models, the new literature is able to model the common characteristics of historical bubble episodes and offer insights for how bubbles are initiated and sustained, the reasons they burst, and why arbitrage forces do not routinely step in to squash them. The latest U.S. real estate bubble is described in the context of this literature.

Speculative Bubbles, Speculative Attacks, and Policy Switching

Robert P. Flood,Peter M. Garber
Speculative Bubbles Speculative Attacks and Policy Switching Book PDF

Author : Robert P. Flood,Peter M. Garber
Publisher : MIT Press
Page : 528 pages
File Size : 47,6 Mb
Release : 1994
Category : Business & Economics
ISBN : 0262061694

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Speculative Bubbles, Speculative Attacks, and Policy Switching by Robert P. Flood,Peter M. Garber Pdf

The papers in this book are grouped into three sections: the first on price bubbles is primarily financial; the second on speculative attacks (on exchange rate regimes) is international in scope; and the third, on policy switching, is concerned with monetary policy.

BEHAVIOURAL FINANCE

M. M. SULPHEY
BEHAVIOURAL FINANCE Book PDF

Author : M. M. SULPHEY
Publisher : PHI Learning Pvt. Ltd.
Page : 209 pages
File Size : 41,7 Mb
Release : 2014-09-01
Category : Business & Economics
ISBN : 9788120350281

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BEHAVIOURAL FINANCE by M. M. SULPHEY Pdf

This comprehensive, lucidly written text is an ideal introduction to behavioural finance. The book caters to the needs of both undergraduate and postgraduate management courses. It covers almost all important topics of behavioural finance prescribed in the syllabi of various universities across India, including Neurofinance and Forensic Accounting, which have rare occurrence in other books but are important from future perspective. There is a dearth of literature in behavioural finance, and if available, then the books are of large volumes, written by foreign authors citing examples and case studies from the countries other than India. Hence, the present book aims at providing information in global scenario, particularly Indian cases. A number of case studies and box items make this text interesting and informative. Review questions given at the end of each chapter help students in assessing their knowledge after having learned the concepts. Overall, the book will help readers in gaining adequate knowledge of the subject.

Asset Bubbles

Bradley Jones
Asset Bubbles Book PDF

Author : Bradley Jones
Publisher : International Monetary Fund
Page : 59 pages
File Size : 47,7 Mb
Release : 2015-02-11
Category : Business & Economics
ISBN : 9781475576207

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Asset Bubbles by Bradley Jones Pdf

In distilling a vast literature spanning the rational— irrational divide, this paper offers reflections on why asset bubbles continue to threaten economic stability despite financial markets becoming more informationally-efficient, more complete, and more heavily influenced by sophisticated (i.e. presumably rational) institutional investors. Candidate explanations for bubble persistence—such as limits to learning, frictional limits to arbitrage, and behavioral errors—seem unsatisfactory as they are inconsistent with the aforementioned trends impacting global capital markets. In lieu of the short-term nature of the asset owner—manager relationship, and the momentum bias inherent in financial benchmarks, I argue that the business risk of asset managers acts as strong motivation for institutional herding and ‘rational bubble-riding.’ Two key policy implications follow. First, procyclicality could intensify as institutional assets under management continue to grow. Second, remedial policies should extend beyond the standard suite of macroprudential and monetary measures to include time-invariant policies targeted at the cause (not just symptom) of the problem. Prominent among these should be reforms addressing principal-agent contract design and the implementation of financial benchmarks.

From Catastrophe to Chaos: A General Theory of Economic Discontinuities

J. Barkley Rosser
From Catastrophe to Chaos A General Theory of Economic Discontinuities Book PDF

Author : J. Barkley Rosser
Publisher : Springer Science & Business Media
Page : 313 pages
File Size : 52,9 Mb
Release : 2013-03-14
Category : Business & Economics
ISBN : 9789401716130

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From Catastrophe to Chaos: A General Theory of Economic Discontinuities by J. Barkley Rosser Pdf

From Catastrophe to Chaos: A General Theory of Economic Discontinuities presents and unusual perspective on economics and economic analysis. Current economic theory largely depends upon assuming that the world is fundamentally continuous. However, an increasing amount of economic research has been done using approaches that allow for discontinuities such as catastrophe theory, chaos theory, synergetics, and fractal geometry. The spread of such approaches across a variety of disciplines of thought has constituted a virtual intellectual revolution in recent years. This book reviews the applications of these approaches in various subdisciplines of economics and draws upon past economic thinkers to develop an integrated view of economics as a whole from the perspective of inherent discontinuity.

Booms, Bubbles, and Busts in US Stock Markets

David L. Western
Booms Bubbles and Busts in US Stock Markets Book PDF

Author : David L. Western
Publisher : Psychology Press
Page : 262 pages
File Size : 44,9 Mb
Release : 2004
Category : Business & Economics
ISBN : 041536969X

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Booms, Bubbles, and Busts in US Stock Markets by David L. Western Pdf

Examines the current conditions before looking back to the events of the last century - The Great Depression, the 1970s oil crisis, the party-for-the-rich atmosphere of the 1980's and the emergence of the new economy.

Economic Uncertainty, Instabilities And Asset Bubbles: Selected Essays

Anastasios G Malliaris
Economic Uncertainty Instabilities And Asset Bubbles Selected Essays Book PDF

Author : Anastasios G Malliaris
Publisher : World Scientific
Page : 373 pages
File Size : 46,7 Mb
Release : 2005-10-03
Category : Business & Economics
ISBN : 9789814480048

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Economic Uncertainty, Instabilities And Asset Bubbles: Selected Essays by Anastasios G Malliaris Pdf

The compendium of papers in this volume focuses on aspects of economic uncertainty, financial instabilities and asset bubbles.Economic uncertainty is modeled in continuous time using the mathematical techniques of stochastic calculus. A detailed treatment of important topics is provided, including the existence and uniqueness of asymptotic economic growth, the modeling of inflation and interest rates, the decomposition of inflation and its volatility, and the extension of the quantity theory of money to allow for randomness.The reader is also introduced to the methods of chaotic dynamics, and this methodology is applied to asset pricing, the European equity markets, and the multi-fractality in foreign currency markets.Since the techniques of stochastic calculus and chaotic dynamics do not readily accommodate the presence of stochastic bubbles, several papers discuss in depth the presence of financial bubbles in asset prices, and econometric work is performed to link such bubbles to monetary policy.Finally, since bubbles often burst rather than deflate slowly, the last section of the book studies the crash of October 1987 as well as other crashes of national equity markets due to the Persian gulf crisis.

Booms, Bubbles and Bust in the US Stock Market

David Western
Booms Bubbles and Bust in the US Stock Market Book PDF

Author : David Western
Publisher : Routledge
Page : 262 pages
File Size : 50,8 Mb
Release : 2020-10-07
Category : Business & Economics
ISBN : 9781000159066

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Booms, Bubbles and Bust in the US Stock Market by David Western Pdf

An extremely user-friendly overview of the inner workings of the US stock market. Things have changed a great deal since the heady days of the 1980s and we are now entering an era of profound uncertainty, with most analysts predicting trouble ahead. Indeed, the alarming decline of the NASDAQ shows no sign of abating and the fear is that traditional industries will be the next to bite the dust. September 11th has only added to the gloomy mood. This book examines the current conditions before looking back to the events of the past century - The Great Depression, the 1970s oil crisis, the party-for-the-rich atmosphere of the 1980s and the emergence of the new economy.

The Economics of Foreign Exchange and Global Finance

Peijie Wang
The Economics of Foreign Exchange and Global Finance Book PDF

Author : Peijie Wang
Publisher : Springer Science & Business Media
Page : 376 pages
File Size : 44,6 Mb
Release : 2005
Category : Business & Economics
ISBN : 354021237X

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The Economics of Foreign Exchange and Global Finance by Peijie Wang Pdf

The book presents all major subjects in international monetary theory, foreign exchange markets, international financial management and investment analysis. The book is relevant to real world problems in the sense that it provides guidance on how to solve policy issues as well as practical management tasks. This in turn helps the reader to gain an understanding of the theory and refines the framework. Various topics are interlinked so the book adopts a systematic treatment of integrated materials relating different theories under various circumstances and combining theory with practice. The text examines issues in international monetary policy and financial management in a practical way, focusing on the identification of the factors and players in foreign exchange markets and the international finance arena. The book can be used in graduate and advanced undergraduate programmes in international or global finance, international monetary economics, and international financial management.