Bankrupt firms' stock displays unique lottery-like characteristics: for only a few cents per stock one can engage in an investment strategy that offers a low probability of huge future reward, and a very high probability of a small loss. Kumar (2009 a) shows that this type of stock is likely to...

Between June 2005 and October 2007, when it peaked, the Chinese stockmarket went up five-fold; it then went into freefall losing 70% of its value over the following year. Such a market price trajectory represents that of a classic stockmarket bubble. This paper seeks to explain what was going on...