An empirical comparison of stock market bubbles

Financial asset bubbles occur due to systematic and continuous differences between fundamental and market values. Due to high growth periods and foreign capital inflows, bubbles are also seen in stock market indexes, especially in emerging market economies. This study analyzes the existence of bubbles in BIST100, IDX COMPOSITE, BOVESPA, MDEX, NIFTY 50, SHANGAI, and S&P 500 stock markets for the period 2009:01-2021:06. RADF, SADF, and GSADF tests are applied to detect bubbles on stock market closing prices. In addition, the emergence and demise dates of the bubbles are determined by employing the date-stamping method. The GSADF test gives more effective results and determines bubbles with different durations in all stock markets, except the S&P 500. The results reveal that the most inefficient market is IDX COMPOSITE, and S&P 500is the most efficient market. The analysis includes the S&P 500, the world's most liquid and most prominent stock market, for comparison. In this respect, bubbles occur more in emerging market exchanges. The findings also confirm the validity of the rational bubble law.

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Spillovers of Stock Markets among the BRICS: New Evidence in Time and Frequency Domains before the Outbreak of COVID-19 Pandemic

Journal of Risk and Financial Management ◽

10.3390/jrfm14030112 ◽

2021 ◽

Vol 14 (3) ◽

pp. 112

Author(s):

Kai Shi

Keyword(s):

Stock Market ◽

Frequency Band ◽

Stock Markets ◽

Emerging Market ◽

Low Frequency ◽

Systematic Risk ◽

Error Variance ◽

Frequency Bands ◽

Volatility Spillovers ◽

Risk Sources

We attempted to comprehensively decode the connectedness among the abbreviation of five emerging market countries (BRICS) stock markets between 1 August 2002 and 31 December 2019 not only in time domain but also in frequency domain. A continuously varying spillover index based on forecasting error variance decomposition within a generalized abbreviation of vector-autoregression (VAR) framework was computed. With the help of spectral representation, heterogeneous frequency responses to shocks were separated into frequency-specific spillovers in five different frequency bands to reveal differentiated linkages among BRICS markets. Rolling sample analyses were introduced to allow for multiple changes during the sample period. It is found that return spillovers dominated by the high frequency band (within 1 week) part declined with the drop of frequencies, while volatility spillovers dominated by the low frequency band (above 1 quarter) part grew with the decline in frequencies; the dynamics of spillovers were influenced by crucial systematic risk events, and some similarities implied in the spillover dynamics in different frequency bands were found. From the perspective of identifying systematic risk sources, China’s stock market and Russia’s stock market, respectively, played an influential role for return spillover and volatility spillover across BRICS markets.

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Predicting Stock Market Indexes, Two Days In Advance, Using NewsInn Algorithm

Business and Economic Research ◽

10.5296/ber.v5i2.8664 ◽

2015 ◽

Vol 5 (2) ◽

pp. 308

Author(s):

Radu Nicoara

Keyword(s):

Stock Market ◽

Sentiment Analysis ◽

Stock Markets ◽

News Article ◽

World News ◽

Opinion Extraction ◽

Extraction Algorithm ◽

Market Indexes

NewsInn is an A.I. Driven Algorithm that processes and conglomerates news from major news publications. It uses an opinion extraction algorithm to do a sentiment analysis on every news article. Considering that stock markets are heavily influenced be world news, we conducted a study to show the link between the detected sentiment inside the news, and the most used Stock Market Indexes: S&P 500, Dow Jones and NASDAQ. Results showed an almost 70.00% accuracy in predicting market fluctuation two days in advance.

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Financial contagion and 2016 oil crisis: a factor analysis

10.31124/advance.12973832.v1 ◽

2020 ◽

Author(s):

Turki Maya

Keyword(s):

Stock Market ◽

Stock Markets ◽

Principal Component ◽

Financial Contagion ◽

Market Returns ◽

Component Structure ◽

Stock Market Returns ◽

Oil Crisis ◽

Market Indexes ◽

Variance Explained

The paper tries to answer the following question: could the 2016 oil price crisis generate financial contagion among stock markets? The study period is composed of two sub-periods; a quiet one from 3/01/2012 to 01/08/2014 and turbulent one from 04/08/2014 to 25/05/2016. Raw data consists of daily international stock market indexes prices. The co-movements of the stock market returns are analyzed through a principal component analysis (PCA). The results revealed that the KMO index (Kaiser-Mayer-Olkin) is higher during the turbulent period than during the quiet one and that the proportion of variance explained by the first component during the turbulent period reached 35% while during the quiet one it represented only 26,7%.Regarding the component structure, for the turbulent period, three factors are able to explain the stock markets indexes movements while for the quiet period four factors are required. The findings give more credit to the thesis supporting the linkage between cross correlation and financial contagion and classify the 2016 oil crisis, as just a coupling episode and not an extreme one.

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A study of co-movements between U.S. and Latin American stock markets: A cross-bicorrelations perspective

DYNA ◽

10.15446/dyna.v83n196.49737 ◽

2016 ◽

Vol 83 (196) ◽

pp. 143-148 ◽

Cited By ~ 3

Author(s):

Semei Coronado-Ramirez ◽

Omar Rojas-Altamirano ◽

Rafael Romero-Meza ◽

Francisco Venegas-Martínez

Keyword(s):

Stock Market ◽

Latin American ◽

Stock Markets ◽

Nonlinear Dependence ◽

Standard And Poor's ◽

Non Linear ◽

Market Indexes

This work applies a test that detects dependence between pairs of variables. The kind of dependence is a non-linear one, and the test is known as cross-bicorrelation, which is associated with Brooks and Hinich [1]. We study dependence periods between U.S. Standard and Poor's 500 (SP500), used as a benchmark, and six Latin American stock market indexes: Mexico (BMV), Brazil (BOVESPA), Chile (IPSA), Colombia (COLCAP), Peru (IGBVL) and Argentina (MERVAL). We have found windows of nonlinear dependence and comovement between the SP500 and the Latin American stock markets, some of which coincide with periods of crisis, leading to an interpretation of a possible contagion or interdependence.

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THE INFLUENCE OF ASYMMETRIC INFORMATION ON FOREIGN CAPITAL INFLOWS IN ASEAN PLUS THREE COUNTRIES

International Journal of Management Studies ◽

10.32890/ijms.28.1.2021.10990 ◽

2021 ◽

Vol 28 ◽

Author(s):

Raihan Ashikin Mohd Nor ◽

Hawati Janor ◽

Mohd Hasimi Yaacob ◽

Noor Azuan Hashim

Keyword(s):

Asymmetric Information ◽

Stock Market ◽

Market Microstructure ◽

Foreign Capital ◽

Capital Inflows ◽

Cross Sectional ◽

Foreign Portfolio Investment ◽

Market Transparency ◽

Depth Analysis ◽

Foreign Capital Inflows

This paper examines the influence of asymmetric information on foreign capital inflows in ASEAN PLUS THREE (ASEAN+3) countries. Linking capital flows to stock market setting, it substantiates other efforts concerning the debatable issues of the effect of asymmetric information on foreign direct investment (FDI) and foreign portfolio investment (FPI). The asymmetric information is captured through the stock market microstructure perspective on the width and depth dimensions using highly frequency cross sectional data from year 2000 to 2015. Roll and Amivest models are employed to quantify the width and depth aspects of the asymmetric information. Employing the panel data technique, the results demonstrate the significant effect of market transparency on foreign capital inflows specifically the FDI as compared to the FPI. An increase in the width and depth analysis based on the Amivest model signifies a high informational transparency, thus shows a lower asymmetric information which consequently leads to the high foreign capital inflows. The results of the study provide information to the policymakers in monitoring capital inflows on the aspect of market transparency and highlight the importance of the stock market microstructure in assessing the asymmetric information for ASEAN+3 countries.

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Anomalies In Asian Stock Market

Media Riset Akuntansi Auditing & Informasi ◽

10.25105/mraai.v8i2.978 ◽

2008 ◽

Vol 8 (2) ◽

pp. 151

Author(s):

Kamaludini ,

Keyword(s):

Stock Market ◽

Key Words ◽

Stock Markets ◽

Emerging Market ◽

Weekend Effect ◽

Market Anomalies ◽

Year Effect ◽

Analysis Methods ◽

Research Show ◽

Market Anomaly

Anomaly phenomena in many stock markets show various results achieved by each researcher. The various results very much depend on time and method used. Most of Asian Stock Market is emerging market. The objective in this research are to know market anomalies, especially those of weekend effect, turn of the month effect, and turn of the yeareffect, in Asian stock markets region. The analysis methods to test for market anomalies are GARCH and AAIOVA. The result in this research is: anomalies that happen on weekend effect and turn of the month effect. Anomalies on the turn of the year effect in this research show no significant result. Anomaly will occur in several condition, in weekend and early of the week, turn of and first the month. Anomaly will happen also in several event, such as; independent and religious day.Key words : Emerging market, GARCH, ANOVA, market anomaly, weekend effect, turn of the month effect, and turn of the year effect.

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The role of liquidity in asset pricing: the special case of the Portuguese Stock Market

Journal of Economics Finance and Administrative Science ◽

10.1108/jefas-12-2016-0001 ◽

2017 ◽

Vol 22 (43) ◽

pp. 191-206 ◽

Cited By ~ 6

Author(s):

María del Mar Miralles-Quirós ◽

José Luis Miralles-Quirós ◽

Celia Oliveira

Keyword(s):

Asset Pricing ◽

Stock Market ◽

Stock Returns ◽

Stock Markets ◽

Emerging Market ◽

Methodological Approach ◽

Model Framework ◽

Content Type ◽

Previous Evidence

Purpose The aim of this paper is to examine the role of liquidity in asset pricing in a tiny market, such as the Portuguese. The unique setting of the Lisbon Stock Exchange with regards to changes in classification from an emerging to a developed stock market, allows an original answer to whether changes in the development of the market affect the role of liquidity in asset pricing. Design/methodology/approach The authors propose and compare two alternative implications of liquidity in asset pricing: as a desirable characteristic of stocks and as a source of systematic risk. In contrast to prior research for major stock markets, they use the proportion of zero returns which is an appropriated measure of liquidity in tiny markets and propose the separated effects of illiquidity in a capital asset pricing model framework over the whole sample period as well as in two sub-samples, depending on the change in classification of the Portuguese market, from an emerging to a developed one. Findings The overall results of the study show that individual illiquidity affects Portuguese stock returns. However, in contrast to previous evidence from other markets, they show that the most traded stocks (hence the most liquid stocks) exhibit larger returns. In addition, they show that the illiquidity effects on stock returns were higher and more significant in the period from January 1988 to November 1997, during which the Portuguese stock market was still an emerging market. Research limitations/implications These findings are relevant for investors when they make their investment decisions and for market regulators because they reflect the need of improving the competitiveness of the Portuguese stock market. Additionally, these findings are a challenge for academics because they exhibit the need for providing alternative theories for tiny markets such as the Portuguese one. Practical implications The results have important implications for individual and institutional investors who can take into account the peculiar effect of liquidity in stock returns to make proper investment decision. Originality/value The Portuguese market provides a natural experimental area to analyse the role of liquidity in asset pricing, because it is a tiny market and during the period studied it changed from an emerging to a developed stock market. Moreover, the authors have to highlight that previous evidence almost exclusively focuses on the US and major European stock markets, whereas studies for the Portuguese one are scarce. In this context, the study provides an alternative methodological approach with results that differ from those theoretically expected. Thus, these findings are a challenge for academics and open a theoretical and a practical debate.

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Rational Speculative Bubbles in the Thai Stock Market: Econometric Tests and Implications

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091507000921 ◽

2007 ◽

Vol 10 (01) ◽

pp. 1-13 ◽

Cited By ~ 3

Author(s):

Sethapong Watanapalachaikul ◽

Sardar M. N. Islam

Keyword(s):

Stock Market ◽

Stock Markets ◽

Emerging Market ◽

Hazard Model ◽

Investment Planning ◽

Efficient Operation ◽

Crisis Period ◽

Speculative Bubbles ◽

Emerging Stock Markets ◽

Econometric Tests

Understanding of factors like economic fundamentals or bubbles that normally determine the returns of stock in any emerging market such as the Thai stock market is essential for academic, investment planning and public policy reasons. An empirical study of the existence of rational speculative bubbles in the Thai stock market is undertaken by using the Weibull Hazard model. The conventional Weibull Hazard model is used as a benchmark model for other speculative bubble models. Empirical results suggest the presence of rational speculative bubbles in the Thai stock market, especially during the pre-crisis period. While rational speculative bubbles were not present immediately after the post-crisis period, some were observed a few years after the crisis. A possible explanation for such a result concerning rational speculative behaviour and bubbles in the emerging stock markets could be attributed to the presence of market imperfections in emerging stock markets, requiring institutional and policy developments to ensure efficient operation of the stock market.

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VENTURE CAPITAL INVESTMENTS IN EMERGING ECONOMIES: AN EMPIRICAL ANALYSIS

Journal of Developmental Entrepreneurship ◽

10.1142/s1084946705000203 ◽

2005 ◽

Vol 10 (03) ◽

pp. 253-269 ◽

Cited By ~ 4

Author(s):

MEDHI SALEHIZADEH

Keyword(s):

Stock Market ◽

Emerging Economies ◽

Emerging Market ◽

Capital Inflows ◽

Venture Capitalists ◽

Capital Investments ◽

Industrialized Countries ◽

Micro Level ◽

Venture Capital Investments

In the international arena an increasing number of entrepreneurs and venture capitalists have succeeded, yielding both micro-level financial rewards and macro-level prosperity and improved economic conditions for many industrialized countries. The next logical "group," with a potential to reap such benefits, is expected to be the emerging economies. This study tabulates and analyzes an emerging market VC-investment dataset, and then identifying and testing a number of independent economic and financial factors that explain such investments for a selected group of emerging countries. Based on 1990-2003 data covering 19 nations, the regression results show four of the five proposed variables, namely GDP per capita, long-term capital inflows, stock market listings, and a measure of stock market correlations, to be significant in explaining VC investments.

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The impact of foreign capital shifts on economic activities and asset prices: a threshold VAR approach

Asian Journal of Economics and Banking ◽

10.1108/ajeb-06-2020-0013 ◽

2020 ◽

Vol 4 (3) ◽

pp. 87-104

Author(s):

Boubekeur Baba ◽

Güven Sevil

Keyword(s):

South Korea ◽

Emerging Markets ◽

Asset Prices ◽

Foreign Capital ◽

Emerging Market ◽

Capital Inflows ◽

Economic Activities ◽

Content Type ◽

Foreign Capital Inflows ◽

The Impact

Purpose The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea. Design/methodology/approach The authors in this paper apply the Bayesian threshold vector autoregressive (TVAR) model to estimate the regimes of large and low inflows of foreign capital. Then, structural impulse-response analysis is used to check whether the responses of the variables differ across the estimated regimes. The model is estimated using quarterly data of foreign capital inflows, gross domestic product (GDP), consumer price index, credit to the private non-financial sector, real effective exchange rate (REER), stock returns and house prices. Findings The main findings suggest that large inflows of gross foreign capital, foreign direct investments (FDI) and foreign portfolio investments (FPI) are ineffective to boost economic growth, but large inflows of other foreign investments (OFIs) significantly contribute to GDP. The decreases in the foreign capital inflows are associated with larger depreciation of REER. The large inflows of gross foreign capital, FDI and OFIs are associated with further expansion of credit supply to private non-financial sectors. Research limitations/implications The policy implications of foreign capital inflows are of particular importance to all the emerging markets alike. However, the empirical analysis is limited to the case of South Korea due to various reasons. The experience with international capital inflows among emerging markets is heterogeneous. Therefore, it would be better to take each case of emerging market individually. In addition, TVAR analysis requires a long data sample, which unfortunately is not available for most of the emerging markets. Originality/value The foreign capital inflows are shown to be procyclical and notoriously volatile in many studies. Nevertheless, this topic has commonly been studied using linear VAR models, which do not properly deal with the cyclical characteristics of foreign capital inflows. This study attempts to resolve these methodological limitations by examining a non-linear VAR model that is capable of capturing the structural breaks associated with the cyclical behaviors of foreign capital inflows.

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