Boom and Bust
Boom and Bust

Author: William Quinn

Publisher: Cambridge University Press

Published: 2020-08-06

Total Pages: 297

ISBN-13: 1108369359

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Why do stock and housing markets sometimes experience amazing booms followed by massive busts and why is this happening more and more frequently? In order to answer these questions, William Quinn and John D. Turner take us on a riveting ride through the history of financial bubbles, visiting, among other places, Paris and London in 1720, Latin America in the 1820s, Melbourne in the 1880s, New York in the 1920s, Tokyo in the 1980s, Silicon Valley in the 1990s and Shanghai in the 2000s. As they do so, they help us understand why bubbles happen, and why some have catastrophic economic, social and political consequences whilst others have actually benefited society. They reveal that bubbles start when investors and speculators react to new technology or political initiatives, showing that our ability to predict future bubbles will ultimately come down to being able to predict these sparks.

Speculation, Trading, and Bubbles
Speculation, Trading, and Bubbles

Author: José A. Scheinkman

Publisher: Columbia University Press

Published: 2014-07-08

Total Pages: 137

ISBN-13: 0231537638

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As long as there have been financial markets, there have been bubbles—those moments in which asset prices inflate far beyond their intrinsic value, often with ruinous results. Yet economists are slow to agree on the underlying forces behind these events. In this book José A. Scheinkman offers new insight into the mystery of bubbles. Noting some general characteristics of bubbles—such as the rise in trading volume and the coincidence between increases in supply and bubble implosions—Scheinkman offers a model, based on differences in beliefs among investors, that explains these observations. Other top economists also offer their own thoughts on the issue: Sanford J. Grossman and Patrick Bolton expand on Scheinkman's discussion by looking at factors that contribute to bubbles—such as excessive leverage, overconfidence, mania, and panic in speculative markets—and Kenneth J. Arrow and Joseph E. Stiglitz contextualize Scheinkman's findings.

Bursting the Bubble: Rationality in a Seemingly Irrational Market
Bursting the Bubble: Rationality in a Seemingly Irrational Market

Author: David F. DeRosa

Publisher: CFA Institute Research Foundation

Published: 2021-04-02

Total Pages: 206

ISBN-13: 1952927110

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The presence of speculative bubbles in capital markets (an important area of interest in financial history) is widely accepted across many circles. Talk of them is pervasive in the media and especially in the popular financial press. Bubbles are thought to be found primarily in the stock market, which is our main interest, although bubbles are said to occur in other markets. Bubbles go hand in hand with the notion that markets can be irrational. The academic community has a great interest in bubbles, and it has produced scholarly literature that is voluminous. For some economists, doing bubble research is like joining the vanguard of a Kuhnian paradigm shift in economic thinking. Not so fast. If bubbles did exist, they would pose a serious challenge to neoclassical finance. Bubbles would contradict the ideas that markets are rational or work in an informationally efficient manner. That’s what makes the topic of bubbles interesting. This book reviews and evaluates the academic literature as well as some popular investment books on the possible existence of speculative bubbles in the stock market. The main question is whether there is convincing empirical evidence that bubbles exist. A second question is whether the theoretical concepts that have been advanced for bubbles make them plausible. The reader will discover that I am skeptical that bubbles actually exist. But I do not think I or anyone else will ever be able to conclusively prove that there has never been a bubble. From studying the literature and from reading history, I find that many famous purported bubbles reflect inaccurate history or mistakes in analysis or simply cannot be shown to have existed. In other instances, bubbles might have existed. But in each of those cases, there are credible rational explanations. And good evidence exists for the idea that even if bubbles do exist, they are not of great importance to understanding the stock market.

Financial Market Bubbles and Crashes
Financial Market Bubbles and Crashes

Author: Harold L. Vogel

Publisher: Palgrave Macmillan

Published: 2022-12-19

Total Pages: 0

ISBN-13: 9783030791841

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Economists broadly define financial asset price bubbles as episodes in which prices rise with notable rapidity and depart from historically established asset valuation multiples and relationships. Financial economists have for decades attempted to study and interpret bubbles through the prisms of rational expectations, efficient markets, equilibrium, arbitrage, and capital asset pricing models, but they have not made much if any progress toward a consistent and reliable theory that explains how and why bubbles (and crashes) evolve and are defined, measured, and compared. This book develops a new and different approach that is based on the central notion that bubbles and crashes reflect urgent short-side rationing, which means that, as such extreme conditions unfold, considerations of quantities owned or not owned begin to displace considerations of price.

Boom and Bust
Boom and Bust

Author: William Quinn

Publisher: Cambridge University Press

Published: 2020-08-06

Total Pages: 297

ISBN-13: 1108421253

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Why do stock and housing markets sometimes experience amazing booms followed by massive busts and why is this happening more and more frequently? Boom and Bust reveals why bubbles happen, and why some bubbles have catastrophic economic, social and political consequences, whilst others have actually benefited society.

Pop!
Pop!

Author: Daniel Gross

Publisher: Harper Collins

Published: 2009-10-13

Total Pages: 244

ISBN-13: 0061850101

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Bubbles—from hot stocks in the 1920s to hot stocks in the 1990s—are much-lamented features of contemporary economic life. Time and again, American investors, seduced by the lures of quick money, new technologies, and excessive optimism, have shown a tendency to get carried away. Time and again, they have appeared foolish when the bubble burst. The history of finance is filled with tragic tales of shattered dreams, bankruptcies, and bitter recriminations. But what if the I-told-you-so lectures about bubbles tell only half the story? What if bubbles accomplish something that can only be seen in retrospect? What if the frenzy of irrational economic enthusiasm lays the groundwork for sober-minded opportunities, growth, and innovation? Could it be that bubbles wind up being a competitive advantage for the bubble-prone U.S. economy? In this entertaining and fast-paced book—you'll laugh as much as you cry—Daniel Gross convincingly argues that every bubble has a golden lining. From the 19th-century mania for the telegraph to the current craze in alternative energy, from railroads to real estate, Gross takes us on a whirlwind tour of reckless investors and pie-in-the-sky promoters, detailing the mania they created—but also the lasting good they left behind. In one of the great ironies of history, Gross shows how the bubbles once generally seen as disastrous have actually helped build the commercial infrastructures that have jump-started American growth. If there is a secret to the perennial resilience and exuberance of the American economy, Gross may just have found it in our peculiar capacity to blow financial bubbles—and successfully clean up the mess.

Financial Market Bubbles and Crashes
Financial Market Bubbles and Crashes

Author: Harold L. Vogel

Publisher: Cambridge University Press

Published: 2009-12-14

Total Pages: 471

ISBN-13: 1316101576

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Despite the thousands of articles and the millions of times that the word 'bubble' has been used in the business press, there still does not appear to be a cohesive theory or persuasive empirical approach with which to study 'bubble' and 'crash' conditions. This book presents a plausible and accessible descriptive theory and empirical approach to the analysis of such financial market conditions. It advances such a framework through application of standard econometric methods to its central idea, which is that financial bubbles reflect urgent short side rationed demand. From this basic idea, an elasticity of variance concept is developed. It is further shown that a behavioral risk premium can probably be measured and related to the standard equity risk premium models in a way that is consistent with conventional theory.

Financial Market Bubbles and Crashes
Financial Market Bubbles and Crashes

Author: Harold L. Vogel

Publisher: Springer Nature

Published: 2021-12-17

Total Pages: 619

ISBN-13: 3030791823

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Economists broadly define financial asset price bubbles as episodes in which prices rise with notable rapidity and depart from historically established asset valuation multiples and relationships. Financial economists have for decades attempted to study and interpret bubbles through the prisms of rational expectations, efficient markets, equilibrium, arbitrage, and capital asset pricing models, but they have not made much if any progress toward a consistent and reliable theory that explains how and why bubbles (and crashes) evolve and are defined, measured, and compared. This book develops a new and different approach that is based on the central notion that bubbles and crashes reflect urgent short-side rationing, which means that, as such extreme conditions unfold, considerations of quantities owned or not owned begin to displace considerations of price.

Bubbles and Contagion in Financial Markets, Volume 1
Bubbles and Contagion in Financial Markets, Volume 1

Author: E. Porras

Publisher: Springer

Published: 2016-06-29

Total Pages: 303

ISBN-13: 1137358769

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Understanding the formation of bubbles and the contagion mechanisms afflicting financial markets is a must as extreme volatility events leave no market untouched. Debt, equity, real estate, commodities... Shanghai, NY, or London: The severe fluctuations, explained to a large extent by contagion and the fear of new bubbles imploding, justify the newly awaken interest in the contagion and bubble dynamics as yet again the world brazes for a new global economic upheaval. Bubbles and Contagion in Financial Markets explores concepts, intuition, theory, and models. Fundamental valuation, share price development in the presence of asymmetric information, the speculative behavior of noise traders and chartists, herding and the feedback and learning mechanisms that surge within the markets are key aspects of these dynamics. Bubbles and contagion are a vast world and fascinating phenomena that escape a narrow exploration of financial markets. Hence this work looks beyond into macroeconomics, monetary policy, risk aggregation, psychology, incentive structures and many more subjects which are in part co-responsible for these events. Responding to the ever more pressing need to disentangle the dynamics by which financial local events are transmitted across the globe, this volume presents an exhaustive and integrative outlook to the subject of bubbles and contagion in financial markets. The key objective of this volume is to give the reader a comprehensive understanding of all aspects that can potentially create the conditions for the formation and bursting of bubbles, and the aftermath of such events: the contagion of macro-economic processes. Achieving a better understanding of the formation of bubbles and the impact of contagion will no doubt determine the stability of future economies – let these two volumes be the starting point for a rational approach to a seemingly irrational phenomena.

Bubbles, Crashes and Financial Disasters
Bubbles, Crashes and Financial Disasters

Author: Ralph Lyons

Publisher: Austin Macauley Publishers

Published: 2024-05-24

Total Pages: 376

ISBN-13: 1035836130

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Throughout history, the allure of promising opportunities has often ignited a speculative frenzy, arousing the get-rich-quick syndrome in millions of credulous souls, driving them to the extremes of ambition and greed in their quest for wealth. The symptoms of such behaviour frequently manifest during the build-up to a market crash, when months or even years of gains are wiped out in mere hours. This phenomenon is known as the ‘boom-and-bust scenario’, characterized by an economic bubble followed by a devastating crash. In this book, we delve into a number of remarkable events that have taken place between the seventeenth century and the present day, culminating in enormous financial losses for the general public or even the collapse of entire economies. The Great Crash of 1929 and some of the instances depicted from the 1980s onwards had seismic effects felt on a global scale. Today, despite living in a highly sophisticated world of economic regulation, financial manipulation, and extensive application of fiscal policy, economic bubbles still seem to burgeon from invisible beginnings, grow rapidly out of control, and then fragment into a melee of problems for modern society. While many believe that the random forces of human nature are responsible, spiralling out of control during periods of heady speculation, others share a different view. They argue that large economic bubbles are non-organic, engineered from within the system itself. This book takes a light-hearted journey through the subject matter, considering both the historical events and the intriguing possibility that financial engineering plays a role in the creation and destruction of economic bubbles.