Log-periodic power law bubbles in Latin-American and Asian markets and correlated anti-bubbles in Western stock markets: An empirical study
AbstractTwenty-two significant bubbles followed by large crashes or by severe corrections in the Argentinian, Brazilian, Chilean, Mexican, Peruvian, Venezuelan, Hong-Kong, Indonesian, Korean, Malaysian, Philippine and Thai stock markets indices are identified and analysed for log-periodic signatures decorating an average power law acceleration. We find that log-periodic power laws adequately describe speculative bubbles on these emerging markets with very few exceptions and thus extend considerably the applicability of the proposed rational expectation model of bubbles and crashes which has previously been developed for the major financial markets in the world. This model is essentially controlled by a crash hazard rate becoming critical due to a collective imitative/herding behavior of traders. Furthermore, three of the bubbles are followed by a log-periodic ``anti-bubble'' previously documented for the decay of the Japanese Nikkei starting in Jan. 1990 and the price of Gold starting in Sept. 1980 thus rendering a qualitative symmetry of bubble and anti- bubble around the date of the peak of the market. A set of secondary western stock market indices (London, Sydney, Auckland, Paris, Madrid, Milan, Zurich) as well as the Hong-Kong stock market are also shown to exhibit well-correlated log-periodic power law anti-bubbles over a period 6-15 months triggered by a rash of crises on emerging markets in the early 1994. As the US market declined by no more than $10\%$ during the beginning of that period and quickly recovered, this suggests that these smaller stock western markets can ``phase lock'' (in a weak sense) not only because of the over-arching influence of Wall Street but also independently of the current trends on Wall Street due to other influences.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Finance with number 9907004.
Length: 36 pages
Date of creation: 20 Jul 1999
Date of revision:
Note: Type of Document - pdf-file; prepared on Linux; to print on HP/PostScript/Franciscan monk; pages: 36 ; figures: included. Paper submitted to Journal of Risk
Contact details of provider:
Web page: http://188.8.131.52
Market bubbles and crashes; emerging markets; log-periodic power laws;
Find related papers by JEL classification:
- G - Financial Economics
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.