In this study, we test for the presence of investor herding behavior in the Tunisian stock market. Further, we explore the explanatory factors of the occurrence of the probability of stock market booms and busts by combining herding behavior of investors and economic and financial fundamentals....

We develop a model of rational bubbles based on the assumptions of unknown market liquidity and limited liability of traders. In a bubble, the price of an asset rises dynamically above its steady-state value, justified by rational expectations about future price developments. The larger the...