Speculative bubbles and the cross-sectional variation in stock returnsKeith Anderson and Chris Brooks International Review of Financial Analysis, 2014, vol. 35, issue C, 20-31 Abstract: Evidence suggests that rational, periodically collapsing speculative bubbles may be pervasive in stock markets globally, but there is no research that considers them at the individual stock level. In this study we develop and test an empirical asset pricing model that allows for speculative bubbles to affect stock returns. We show that stocks incorporating larger bubbles yield higher returns. The bubble deviation, at the stock level as opposed to the industry or market level, is a priced source of risk that is separate from the standard market risk, size and value factors. We demonstrate that much of the common variation in stock returns that can be attributable to market risk is due to the co-movement of bubbles rather than being driven by fundamentals. Keywords: Speculative bubbles; Asset pricing; Stock returns; CAPM; Cross-sectional variation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:35:y:2014:i:c:p:20-31 DOI: 10.1016/j.irfa.2014.07.004 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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