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The Mirror of History: How to Statistically Identify Stock Market Bubble Bursts

Author

Listed:
  • S. Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie, VNU - Vietnam National University [Hanoï], Swansea University)

  • Zhenya Liu

    (Renmin University of China = Université Renmin de Chine, CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)

  • Tianqing Sui

    (Renmin University of China = Université Renmin de Chine)

  • L. Zhai

    (Renmin University of China = Université Renmin de Chine)

Abstract
This paper proposes a method for detecting bubble phases and the timing of bursts in global stock markets. The study identifies 27 bubbles in 29 global stock market indices over the last century. Using transformations and change-point detection on index returns, we discover that every major bubble has the same two-phase pattern indeed. Although the mechanisms or causes of each bubble are complex and unique, they all follow the same pattern. Thus, our findings suggest that history has a tendency to repeat itself. © 2022 Elsevier B.V.

Suggested Citation

  • S. Boubaker & Zhenya Liu & Tianqing Sui & L. Zhai, 2022. "The Mirror of History: How to Statistically Identify Stock Market Bubble Bursts," Post-Print hal-04454682, HAL.
    • Handle: RePEc:hal:journl:hal-04454682
    DOI: 10.1016/j.jebo.2022.09.024
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    References listed on IDEAS

    as
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    Cited by:

    1. Foglia, Matteo & Miglietta, Federica, 2024. "Does every cloud (bubble) have a silver lining? An investigation of ESG financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    2. Li, Bo & Liu, Zhenya & Teka, Hanen & Wang, Shixuan, 2023. "The evolvement of momentum effects in China: Evidence from functional data analysis," Research in International Business and Finance, Elsevier, vol. 64(C).
    3. Muhammad Ramzan & Mohammad Razib Hossain & Kashif Raza Abbasi & Tomiwa Sunday Adebayo & Rafael Alvarado, 2024. "Unveiling time-varying asymmetries in the stock market returns through energy prices, green innovation, and market risk factors: wavelet-based evidence from China," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-36, June.
    4. Dettoni, Robinson & Gil-Alana, Luis A. & Yaya, OlaOluwa S., 2024. "Stock market prices and Dividends in the US: Bubbles or Long-run equilibria relationships?," International Review of Financial Analysis, Elsevier, vol. 94(C).
    5. Dettoni, Robinson & Gil-Alana, Luis Alberiko, 2023. "Testing the hypothesis of duration dependence in the U.S. housing market," Finance Research Letters, Elsevier, vol. 58(PD).
    6. Gian Luca Vriz & Luigi Grossi, 2024. "Green bubbles: a four-stage paradigm for detection and propagation," Papers 2410.06564, arXiv.org.

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    More about this item

    Keywords

    Bubble burst; Change-point detection; Stock markets; Transformation method;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G01 - Financial Economics - - General - - - Financial Crises

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