Abstract
We present a new approach to identifying asset price bubbles based on options data. We estimate asset bubbles by exploiting the differential pricing between put and call options. We apply our methodology to two stock market indexes, the S&P 500 and the Nasdaq-100, and two technology stocks, Amazon and Facebook, over the 2014–2018 sample period. We find that, while indexes do not exhibit significant bubbles, Amazon and Facebook show frequent and significant bubbles. The estimated bubbles tend to be associated with large volatility and large trading volume. Since our approach can be implemented in real time, it is useful to both policy-makers and investors.
Published Version
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