Artigo em revista científica Q1
A new mechanism for anticipating price exuberance
Afonso Moniz Moreira (Moreira, A.); Luís Martins (Martins, L. F.);
Título Revista
International Review of Economics and Finance
Ano (publicação definitiva)
2020
Língua
Inglês
País
Países Baixos (Holanda)
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Abstract/Resumo
It is very important for investors, market regulators, and policy makers to possess a trustworthy ex-ante tool capable of anticipating price exuberance events. This paper proposes a new statistical mechanism to predict speculative bubbles by inferring a significant probability of exuberance at least one step ahead of a bubble peak period. Contrary to other approaches, we combine asset pricing modeling and non-stationarity statistical analysis and use both in the context of adaptive learning to build a dynamic model specification. Monte Carlo simulations show that the ex-ante prediction is improved enormously by adding the estimated abnormal returns into the model. In some cases our mechanism predicts 100% of the last bubbles of the sample up to five periods before the peak. Furthermore, the mechanism is able to successfully anticipate the technological bubble observed in the 1990’s by estimating a probability greater than 90%, one month before the bubble peak. Thus, this new mechanism provides an advantage for investors interested in performing a very profitable “bubble surfing” strategy and for market regulators whose responsibility is to maintain market efficiency.
Agradecimentos/Acknowledgements
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Palavras-chave
Speculative bubbles,Asset pricing,Non-stationarity,Adaptive learning,Dynamic models
  • Economia e Gestão - Ciências Sociais
Registos de financiamentos
Referência de financiamento Entidade Financiadora
UID/GES/00315/2019 Fundação para a Ciência e a Tecnologia