A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...

This paper examines the inter-linkages and long run integration of Indian economy with other economies of the world (US, Europe, Other Emerging markets and World economy) using standard indices of MSCI over the period Jan 2003 to July 2012. We also investigate Indian economy's response to recent...

This study examines financial contagion in stock markets of India, Sri Lanka and Pakistan during various financial crises. These markets represent a significant part of South Asian economies; therefore, the results obtained can be generalized to the region. The paper employs an Exponential GARCH...

In “This Time is Different: Behavioural Aspects of Financial Crises,” Brandes Institute Advisory Board member Bruce Grantier reviews the book This Time is Different: Eight Centuries of Financial Folly. With this review, Grantier provides a reminder to investors of the frequency and nature of...

Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust - and the subsequent...

This paper compares the performance of safe haven assets during two stressful stock market regimes – the 2008 Global Financial Crisis (GFC) and COVID-19 pandemic. Our analysis across the ten largest economies in the world shows that the traditional choice, gold, acts as a safe haven during the...

Using a sample of U.S. firms between 1996 and 2011, this paper documents a positive association between options trading volume and future stock price crash risk. This relation is evidently more pronounced among firms with higher information asymmetry, business uncertainty, and short-sale...

We provide a historical perspective focusing on Ziemba's experiences and research on the bond-stock earnings yield differential model (BSEYD) starting from when he first used it in Japan in 1988 through to the present in 2014. The model has called many but not all crashes. Those called have high...

The principles of behavioral psychology can explain how crashes occur. In particular, the concept of "stimulus generalization" tells us that organisms tend to respond in the same way to similar stimuli. In a crash, or pre-crash, context, several stimuli - including rising prices, above-average...

One of the most popular investment anecdotes relates how Isaac Newton, after cashing in some large early gains, staked his fortune on the success of the South Sea Company of 1720 and lost heavily in the ensuing crash. However, this tale is based on only a few scraps of hard evidence, some of...