Stock Price Bubbles Research Articles

Can you keep a secret? The dissemination of false rumors and the evolution of bubbles in perceived predatory trading games

This research addresses the impact of fake rumors on the evolution of bubbles in stock prices in a perceived predatory trading game. In line with intuition, we find that the development of these bubbles is significantly different from the formation and progression of bubbles based on true rumors. Particularly, the first increase in stock prices may be followed by a crash when the rumor is not true. More volatility is observed when there are many players or when there is a lot of pressure to act on the victim. In contrast, the dissemination of the rumor has a dampening effect on the inflation of the bubble when the rumor is true. Moreover, it is more difficult to detect false rumors from stock prices when there are many predators. This observation makes herding among predators a particular challenging problem for regulators and policymakers.

Does accounting information identify bubbles for Fama? Evidence from accruals

Economists have long observed that stock price bubbles are associated with corporate overinvestment. We study the ex-ante identification of bubbles (i.e. stock price booms followed by busts) by examining industry-level investments in net operating asset (NOA) accruals and stock returns for 49 countries around the world. Consistent with overinvestment in operating assets being key to bubble formation, we document five findings: (1) NOA accruals positively forecast the eventual crash of an industry price run-up; (2) NOA accruals negatively forecast stock returns following a run-up; (3) NOA accruals are positively associated with investor sentiment; (4) higher NOA accruals forecast more disappointing earnings relative to analysts’ expectations for run-up industries; and (5) NOA accruals are sharply stronger predictors of crashes, returns and analyst forecast errors following run-ups compared to other periods. Our results provide the first evidence that accounting information identifies stock price bubbles and suggest that financial statements are important for detecting and anticipating industry- and market-level inefficiencies.

Detection of Stock Price Bubbles in KOSPI and KOSDAQ Industries and Selection of Predictive Covariates using Penalized Logit Models

Detection of Stock Price Bubbles in KOSPI and KOSDAQ Industries and Selection of Predictive Covariates using Penalized Logit Models

Determining the Ebullient Phases in EFTA Stock Markets

Previous empirical literature supports the idea that stock bubbles have impacts on the efficient allocation of wealth. Researchers targeted various economies in the past using various methods to explore the bubble phenomenon. This study uses the generalized SADF test, which is admitted by empirical literature to be the most successful technique, to explore stock bubbles in three countries included in the European Free Trade Association (EFTA) that have not been studied before. This paper takes the lead and tests for the existence of bubbles in the monthly end index prices of respective countries based on the latest available time series data from January 2001 to September 2019. Based on empirical results, it is concluded that the stock markets of all three countries experienced multiple bubbles during the study period. The case of Iceland is worse, where comparatively more fluctuations in stock prices are seen. To avoid the occurrence of further stock price bubbles in these countries, policy recommendations are provided as well.

Martingale defects in the volatility surface and bubble conditions in the underlying

AbstractThe martingale theory of bubbles enables testing for asset price bubbles by analyzing option prices. As recently shown by Piiroinen et al. (Asset price bubbles: an option-based indicator, 2018), the SABR model is a strict local martingale when its parameterization implies a positive correlation between stock and option prices. We operationalize this theoretical result and analyze stock price bubbles in 2576 stocks over 26 years. Martingale defect conditions are absorbed quickly by options markets, but identify high proportions in significant and permanent changes in distribution of price returns, option trading activity, short interest in the underlying, and institutional ownership. These results confirm many common assumptions about stock price bubbles. These bubbles are temporally clustered, and tend to occur in periods of positive market development. Martingale defects are rare in market corrections, which indicates that they are a result of overoptimistic speculation.

REINVESTIGATING THE INFLUENCE OF DOT COM BUBBLE ON FINANCIAL MARKET AND INVESTMENTS

Development of financial markets and investment sector have ensured mutual reinforcement which was started in 1995 and deepened until the collapse of the bubble in 2000, which refined the characteristics of the web. This study thoroughly investigates speculative dot com bubble in research related to corporate finance by exploring the issues of dividend policy. In addition, we examined the dividend policy and speculative bubbles on the dataset and S&P 500. This study designs the contours of this capacity with emphasis on the generation of demand. Considering the “dividend smoothing” phenomenon, this article raises question on the efficiency of dividends observed as an important factor that affects investment bubbles. This study builds hypothetical payouts of dividends as per the corporate earnings reported. It is inferred that firms’ dividend policy affects speculative bubbles. The “dotcom bubble” is widely known as a common example for a “stock price bubble” in various equity indices like NASDAQ. It is observed with the dividend series observed as a common factor. It is not basically the case with the adjusted time series of dividends.

Investor Sentiment Mining Based on Bi-LSTM Model and its Impact on Stock Price Bubbles

Abstract We built a Bi-Directional long-term and short-term memory (Bi-LSTM) model to identify and classify the Chinese posting text of stocks on the Eastmoney website in China and constructed the daily index of Chinese investors’ sentiment. Furthermore, based on the GSADF method, we examine the stock price bubbles and study the impact of investor sentiment and stock price bubbles. We found investor sentiment has a positive effect on the existence of stock bubbles, as well as their intensity. This effect is more significant in small-scale, high-equity concentration, and non-state-owned enterprises. Investor sentiment has an impact on stock price bubbles through volatility, and stock price bubbles are often accompanied by higher premium risk. The conclusion is helpful to understand the mechanism of investor sentiment on stock bubbles from a micro perspective, and it also can be a reference in identifying stock bubbles from the viewpoint of investor sentiment.

Institutional investor heterogeneity and systemic financial risk: Evidence from China

This paper explores the different effects of stress-resistant and stress-sensitive institutional investors on systemic financial risk in China. We show that systemic financial risk decreases with stress-resistant institutional shareholding but increase with stress-sensitive institutional shareholding. Two mediation mechanisms and two moderation mechanisms of analysts’ attention and stock price bubbles are identified. Specifically, the analysts’ attention presents a negative mediating effect and positive moderating effect between stress-resistant institutional shareholding and systemic financial risk, while stock price bubbles exhibit a negative mediating effect and positive moderating effect between stress-sensitive institutional shareholding and systemic financial risk. Our paper highlights the importance of appropriately guiding institutional investors to regulatory authorities, especially when institutional investors are encouraged to participate in Chinese stock markets.

Asset securitization and bank stock price performance: Bubble increase or risk transfer?

In this study, we analyzed 40 commercial bank annual reports from 2014 to 2021 to clarify the influence of tangible and intangible asset securitization on bank stock price bubbles, based on the banks’ preference for issuing asset securitization. The empirical findings show that tangible asset securitization suppresses the emergence of bank stock price bubbles by improving internal control quality. In contrast, intangible asset securitization weakens the internal control quality while enhancing bank liquidity, exacerbating stock price bubbles. Furthermore, the results of configuration research found interactions between factors that impact bank stock price bubbles, no single factor is necessary to exacerbate bank stock price bubbles. Additionally, three configurations dominate high stock price bubbles in banks: liquidity, credit, and profit risks. The study recommends that banks develop asset securitization issuance policies, promote business transformation, prevent and resolve systemic risks, and facilitate capital market improvement and high-quality economic development.

Social Media Interactions and Stock Price Bubble: A Case Study of GameStop

Bong bóng thị trường tài chính gần đây đã tạo ra những vấn đề nghiêm trọng đối với tăng trưởng kinh tế bền vững cho tất cả các quốc gia trên toàn cầu. Do đó, nghiên cứu này nhằm mục đích khám phá mối quan hệ giữa tương tác xã hội và bong bóng thị trường chứng khoán và giải thích nguyên nhân và sự phát triển của bong bóng thị trường tài chính. Sử dụng một tập hợp hơn 286.000 bài đăng từ Twitter liên quan đến giá cổ phiếu GameStop từ tháng 12 năm 2020 đến cuối tháng 2 năm 2021 và phương pháp phân tích mạng liên kết qua phần mềm Gephi cũng như phương pháp nghiên cứu điển hình, nghiên cứu này tìm hiểu về sự tương tác giữa các nhà đầu tư trên mạng xã hội và tác động của các mối liên kết trên mạng xã hội này đến sự hình thành và diễn biến của bong bóng giá cổ phiếu GameStop vào đầu năm 2021. Kết quả cho thấy có 5 mạng liên kết được hình thành giữa các nhà đầu tư và sự khác biệt đáng kể trong mức độ kết nối giữa những người dùng cũng như mức độ lan truyền thông tin khác nhau trong từng mạng liên kết có tác động đáng kể đến mức độ biến động của giá cổ phiếu GameStop. Nghiên cứu này có thể hỗ trợ các nhà đầu tư, công ty chứng khoán và cơ quan chính phủ hiểu rõ hơn hành vi xã hội của các nhà đầu tư, cũng như giám sát và ngăn ngừa bong bóng giá cả.

Stock Price Bubble, Debt Maturity Structur, Institusional Ownership dan Stock Price Crash Risk di Perusahaan Teknologi Indonesia

This study aims to impirically determine the influence of the stock price bubble, long-term debt and institutional ownership on the stock price crash risk in Indonesian technology companies in 2019-2021. The sampling technique in this study was using the proposive sampling method and obtained samples of 16 companies with a total observation of 48. The data analysis used in this study used the panel data regression method using the eviews 10 analysis tool. The results of this study show that long-term debt has a significant effect on stock price crash risk, meaning that companies that have a larger long-term debt structure in their capital structure have a higher stock price crash risk. Meanwhile, the stock price bubble and institutional ownership do not have a significant effect on the stock price crash risk. Simultaneously or together the stock price bubble, long-term debt and institutional ownership have a significant effect on stock price crash risk. Based on the results of the coefficient determination test, an adjusted R-square value of 0.8497 was obtained, meaning that the contribution of the independent variable in explaining the dependent stock price crash risk variable was 84.97%. This research is expected to be used as a consideration for interested parties, especially company managers and investors, to be able to pay attention to the factors that will cause stock price crash risk in Indonesian technology companies.

Identifying a Stock Price Bubble and its Macroeconomic Implications

Identifying a Stock Price Bubble and its Macroeconomic Implications

Study on the Pakistan stock market using a new stock crisis prediction method.

A Stock market collapse occurs when stock prices drop by more than 10% across all main indexes. Predicting a stock market crisis is difficult because of the increased volatility in the stock market. Stock price drops can be triggered by a variety of factors, including corporate results, geopolitical tensions, financial crises, and pandemic events. For scholars and investors, predicting a crisis is a difficult endeavor. We developed a model for the prediction of stock crisis using Hybridized Feature Selection (HFS) approach. Firstly, we went for the suggestion of the HFS method for the removal of stock’s unnecessary financial attributes. The Naïve Bayes approach, on the other hand, is used for the classification of strong fundamental stocks. In the third step, Stochastic Relative Strength Index (StochRSI) is employed to identify a stock price bubble. In the fourth step, we identified the stock market crisis point in stock prices through moving average statistics. The fifth is the prediction of stock crises by using deep learning algorithms such as Gated Recurrent Unit (GRU) and Long-Short Term Memory (LSTM). Root Mean Square Error (RMSE), Mean Squared Error (MSE) and Mean Absolute Error (MAE) are implemented for assessing the performance of the models. The HFS-based GRU technique outperformed the HFS-based LSTM method to anticipate the stock crisis. To complete the task, the experiments used Pakistan datasets. The researchers can look at additional technical factors to forecast when a crisis would occur in the future. With a new optimizer, the GRU approach may be improved and fine-tuned even more.

Price Efficiency, Bubbles, Crashes and Crash Risk: Evidence from Chinese Stock Market

When there is bad news hoarding from managers, returns of stocks are no longer efficient. We hypothesize that a proxy for efficient returns predicts stock price bubbles, crashes and crash risk. We find evidence in support of our hypotheses. Lagged price efficiency significantly predicts bubbles, crashes and crash risk in multivariate linear regressions and logit regressions, as predicted by our hypotheses. We also find that the lagged probability of bubbles is only correlated with future returns. In contrast, the lagged probability of crashes is correlated with both future returns and fundamental values of stocks. This result validates our explanation for the formation of bubbles and crashes. Finally, the out-of-sample accuracy ratio of our bubble and the crash prediction model is higher than in previous studies. Our results provide alternative explanations of the mechanics of stock price bubbles and crashes and are helpful for academicians, investors and policymakers.

Central environmental protection inspector and stock price crash risk-evidence from polluting industries firms in China.

In recent years, under the background of vigorously promoting environmental governance, the implementation effect of the central environmental protection inspection is an issue of great concern to the government and the public. This paper systematically investigates the impact of central environmental protection inspection on the risk of stock price crash using a sample of listed firms in polluting industries. The results show that compared with non-supervised areas, central environmental protection inspection can reduce the polluting industries' firms' stock price crash risk by reducing stock price bubbles. After a series of robustness tests, the results still held. The above transmission mechanism is more effective in the samples of private enterprises, low information transparency and disclosure quality enterprises, non-national civilized urban areas, and high promotion incentive areas. Furthermore, this paper found that there were differences in the effects of central environmental protection inspection in different batches. Among the effects of central environmental protection inspection in different batches, the effect of environmental regulation in the second, third, and fourth batches was better, and the effect of central environmental protection inspection in different batches gradually deepened. Finally, by analyzing the environmental governance of the central environmental protection inspection, it is found that the central environmental protection inspection has significant short-term and long-term control effect in air pollution governance, and it is still necessary to strengthen the law enforcement in water pollution governance.

An innovative MS-VAR model with integrated financial knowledge for measuring the impact of stock market bubbles on financial security

In the modern financial system, division of labor and close cooperation between different departments are determinants of risk contagion. The risk resulting from the volatility of the stock market can easily spread to other industries and departments, leading to systemic financial and economic crises. Previous research has mostly examined financial security from the lens of macro currency security, and the security of the banking system, but has ignored its micro-basic problems, such as the bounded rationality of investors due to the lack of financial knowledge. The study analyzes the behavior of micro-investors, price fluctuations in the meso‑stock market, and the macro-financial security in a unified framework. First, we use the comprehensive analysis method to superimpose some basic values and investor behavior characteristics, such as the stock price fluctuation index, and then construct the ultimate stock price bubble index; second, the principal component method is used to establish a financial security index that is in line with basic economic reality and consistent with previous studies; the innovative MS-VAR model is used to analyze whether the stock price bubble will affect financial security, and the rhythm and correlation of the two parties under different regimes are summarized. The results show that the stock market bubble level is the Granger cause of financial security, the stock market bubble index is the leading indicator of the financial security index, and the relevant parameters of the model are significant and have obvious economic significance. This study has important implications for scientific market regulation.

Investor Sentiment Mining Based on Bi-Lstm Model and its Impact on Stock Price Bubbles

Investor Sentiment Mining Based on Bi-Lstm Model and its Impact on Stock Price Bubbles

Factors Affecting the Prediction of Irregularity Stock Price Bubble

در ادبیات مالی حباب به وضعیتی گفته می‌شود که قیمت بازار یک کالا با تفاوت فاحشی نسبت به ارزش‌ ذاتی آن معامله شود. چون تعیین ارزش واقعی، کار دشواری است معمولاً پس از افت ناگهانی قیمت و به اصطلاح ترکیدن حباب؛ متوجه وجود حباب می‌شوند. ویژگی حباب، موقتی بودن آن است. در این حالت سرمایه‌گذاران با هجوم بدون توجه به ارزش واقعی بازار یک کالا اقدام به خرید هیجانی در بازار می‌کنند که باعث جدا شدن قیمت بازار یک کالا از ارزش واقعی آن می‌شود. نظر به اهمیت این موضوع؛ مطالعه حاضر بر پایه بررسی عوامل موثر بر پیش‌بینی بی‌قاعدگی حباب قیمتی سهام بنا نهاده شده است.‌ ‌در این تحقیق و به منظور حصول اهداف پژوهش؛ اطلاعات 99 شرکت برای یک دوره دوازده ساله ‌از ابتدای سال 1388 تا پایان سال‌ 1399 استخراج، ‌متغیرهای پژوهش محاسبه شده و آزمون‌های آماری لازم صورت گرفت. روش پژوهش حاضر از نوع توصیفی- همبستگی بوده و طرح آن از نوع بنیادی و با استفاده از رویکرد پس‏رویدادی است. یافته‌ها حاکی از این امر بود که از میان متغیرهای طرح‌شده؛ عملکرد مالی و عملکرد بازار بر پیش‌بینی بی‌قاعدگی سهام مؤثر هستند.

Economic policy uncertainty exposure and stock price bubbles: Evidence from China

We explore the impact of economic policy uncertainty exposure (hereafter, EPU exposure) on stock price bubbles. We find that there exists a significantly positive relationship between EPU exposure and stock price bubbles. This result is still significant after a series of robustness checks. Moreover, the relationship between EPU exposure and bubbles is due to retail investors' speculative trading behavior. In addition, optimistic aggregate states and firms with higher information uncertainty characteristics strengthen the EPU exposure effects. Overall, we provide unique evidence regarding the impact of uncertainty on stock prices.

Do Tobin taxes help stop stock price bubbles?

PurposeThis study aims to report on experimental asset markets designed to examine the impact of a levy on trade, as well as the taxation authority’s ability to raise tax revenue when markets are subject to mispricing. Some have suggested that a transaction tax will discourage irrational speculation and lead to more efficient markets, but others argue that a higher cost of trading will prove to be an impediment to trade with no useful outcomes.Design/methodology/approachThe authors’ goal is to provide insight on the impact of a transaction tax in a very specific asset market. The authors chose this design because the robustness of the bubble and crash pattern points to an environment that is particularly appropriate for the study of the effectiveness of a transaction tax in promoting efficient pricing. Furthermore, in a laboratory, the authors can control for extraneous factors that are problematic in the study of naturally occurring environments.FindingsThe authors examine whether a securities transaction tax promotes efficiency in markets that are prone to mispricing and find little evidence that a tax on trade will reduce speculation.Research limitations/implicationsThis study’s experimental environment is, of course, an abstraction of naturally occurring markets and it may be that the model excludes important aspects.Social implicationsThe authors find that a tax on financial transactions allows the taxation authority to raise significant revenue with little impact on pricing or trading volume.Originality/valueTo the best of the authors’ knowledge, this study is the first systematic examination of a transaction tax on outcomes in a market that is prone to mispricing.