Log-periodic power law bubbles in Latin-American and Asian markets and correlated anti-bubbles in Western stock markets: An empirical study
Twenty-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.
|Date of creation:||20 Jul 1999|
|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://econwpa.repec.org|
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:9907004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.