Financial Market Bubbles and Crashes

This book explains how and why financial bubbles and crashes occur.

Harold L. Vogel (Author)

9780521199674, Cambridge University Press

Hardback, published 14 December 2009

384 pages, 63 b/w illus. 34 tables
24.1 x 16.5 x 2.5 cm, 0.672 kg

'… the intent of this study to conduct an exploration and analysis that might eventually lead to a robust, unified general theory applicable to all types and sizes of asset-price bubbles is more than welcome. … the book is easily accessible and provides an exciting introduction into this up-to-date topic. … a readable introduction into an exciting and relevant topic.' Journal of Economics and Statistics

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.

Part I. Background for Analysis: 1. Introduction
2. Bubble stories
3. Random walks
4. Bubble theories
5. Framework for investigation
Part II. Empirical Features and Results: 6. Bubble basics
7. Bubble dynamics
8. Money and credit features
9. Behavioral risk features
10. Crashes, panics, and chaos
11. Financial asset bubble theory.

Subject Areas: International business [KJK], Business & management [KJ], Finance [KFF], Finance & accounting [KF]