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Booms, busts and behavioural heterogeneity in stock prices

Hommes, Cars H.; Veld, Daan in't - 2015 - This draft: July 2015

We empirically evaluate a behavioural model with boundedly rational traders who disagree about the persistence of deviations from the fundamental stock price. Fundamentalist traders believe in mean-reversion, while chartists extrapolate trends. Agents gradually switch between the two rules,...

Persistent link: https://www.econbiz.de/10011301214

Does credit affect stock trading? : evidence from the South Sea Bubble

Braggion, Fabio; Frehen, Rik; Jerphanion, Emiel - 2020

Persistent link: https://www.econbiz.de/10012219022

A model of financial bubbles and drawdowns with non-local behavioral self-referencing

Malevergne, Yannick; Sornette, Didier; Wei, Ran - 2021

We propose a novel class of models in which the crash hazard rate is determined by a function of a non-local estimation of mispricing. Rooted in behavioral finance, the non-local estimation embodies in particular the characteristic of "anchoring" on past price levels and the "probability...

Persistent link: https://www.econbiz.de/10012800780

Bubble Diagnosis and Prediction of the 2005-2007 and 2008-2009 Chinese Stock Market Bubbles

Jiang, Zhi-Qiang - 2010

By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding …-periodic power law (LPPL) model has been developed as a flexible tool to detect bubbles. The LPPL model considers the faster … diagnostic of bubbles. It embodies a positive feedback loop of higher return anticipations competing with negative feedback …

Persistent link: https://www.econbiz.de/10013144342

Are there price bubbles in the Swedish equity market?

Nydahl, Stefan; Sellin, Peter - 1999

Persistent link: https://www.econbiz.de/10011584314

What is the impact of stock market contagion on an investor's portfolio choice?

Branger, Nicole; Kraft, Holger; Meinerding, Christoph - 2009

Stocks are exposed to the risk of sudden downward jumps. Additionally, a crash in one stock (or index) can increase the risk of crashes in other stocks (or indices). Our paper explicitly takes this contagion risk into account and studies its impact on the portfolio decision of a CRRA investor...

Persistent link: https://www.econbiz.de/10009764762

Momentum Crashes and Variations to Market Liquidity

Butt, Hilal Anwar - 2019

We document that the variation in market liquidity is an important determinant of momentum crashes that is independent of other known explanations surfaced on this topic. This relationship is driven by the asymmetric large return sensitivity of short-leg of momentum portfolio to changes in...

Persistent link: https://www.econbiz.de/10012895183

Crowded Trades, Short Covering, and Momentum Crashes

Yan, Philip - 2014

Despite momentum's strong historical performance, its returns have large negative skewness and occasionally experiences persistent strings of sharp negative returns, referred as "momentum crashes" in the recent literature. I argue that momentum crashes are due to crowded trades which push prices...

Persistent link: https://www.econbiz.de/10013057742

Momentum Crash Management

Heidari, Mahdi - 2015

Momentum is one of the largest and most pervasive market anomalies. However, despite a high mean and Sharpe ratio, momentum suffers from large negative skewness that comes from momentum crash periods. These crashes occur in times of both market stress and market rebound and thus variables that...

Persistent link: https://www.econbiz.de/10013026403

Taming Momentum Crashes

Bianchi, Daniele; De Polis, Andrea; Petrella, Ivan - 2022

We provide empirical evidence that the returns on US equity momentum exhibit a time-varying skewness which deepens during dramatic losses (crashes). As a result, the dynamics of the strategy expected returns reflects the time variation in both conditional volatility and skewness. This has first...

Persistent link: https://www.econbiz.de/10013403316

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