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The Mirror of History: How to Statistically Identify Stock Market Bubble Bursts

Author

Listed:
  • S. Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie, VNU - Vietnam National University [Hanoï], Swansea University)

  • Zhenya Liu

    (Renmin University of China = Université Renmin de Chine, CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)

  • Tianqing Sui

    (Renmin University of China = Université Renmin de Chine)

  • L. Zhai

    (Renmin University of China = Université Renmin de Chine)

Abstract

This paper proposes a method for detecting bubble phases and the timing of bursts in global stock markets. The study identifies 27 bubbles in 29 global stock market indices over the last century. Using transformations and change-point detection on index returns, we discover that every major bubble has the same two-phase pattern indeed. Although the mechanisms or causes of each bubble are complex and unique, they all follow the same pattern. Thus, our findings suggest that history has a tendency to repeat itself. © 2022 Elsevier B.V.

Suggested Citation

  • S. Boubaker & Zhenya Liu & Tianqing Sui & L. Zhai, 2022. "The Mirror of History: How to Statistically Identify Stock Market Bubble Bursts," Post-Print hal-04454682, HAL.
    • Handle: RePEc:hal:journl:hal-04454682
    DOI: 10.1016/j.jebo.2022.09.024
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    Cited by:

    1. Li, Bo & Liu, Zhenya & Teka, Hanen & Wang, Shixuan, 2023. "The evolvement of momentum effects in China: Evidence from functional data analysis," Research in International Business and Finance, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Bubble burst; Change-point detection; Stock markets; Transformation method;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G01 - Financial Economics - - General - - - Financial Crises

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