This study tests for the presence of periodically, partially collapsing speculative bubbles in the sector indices of the S&P 500 using a regime-switching approach. We also employ an augmented model that includes trading volume as a technical indicator to improve the ability of the model to time bubble collapses and to better capture the temporal variations in returns. We find that well over half of the S&P 500 index by market capitalization and seven of its ten sector component indices exhibited at least some bubble-like behavior over our sample period. Thus the speculative bubble that grew in the 1990s and subsequently collapsed was surprisingly pervasive in the US equity market and it affected numerous sectors including financials and general industrials, rather than being confined to information technology, telecommunications and the media. In addition, we develop a joint model for cross-sectional contagion of bubbles across the sectors and we examine whether there is evidence for bubble spillovers.
Most of the results from past experiments with wild birds and green and brown pastry ‘baits’ have suggested that disproportionately more of the rare forms are eaten when bait density is high (i.e. selection is anti‐apostatic). In two separate series of experiments we presented birds with dishes containing 270 baits of one colour and 30 of another. In series I, five different pairs of colours were presented simultaneously to wild birds at two sites. One colour of each pair was common at one site and the same colour was rare at the other site. After 35 days the ratios of the colours were reversed and the dishes were presented for another 35 days. There was a statistically significant tendency for the colours to be at a higher risk when rare. In series II, three caged blackbirds were offered green and brown baits in two dishes simultaneously; in one dish green was rare and in the other brown was rare. Selection over 6 days was anti‐apostatic for all three birds combined but the data proved heterogeneous both between and within individuals. At any one time, each bird tended to concentrate on one colour, irrespective of whether that colour was rare or common. We believe that this behaviour leads to anti‐apostatic selection, as has been observed in these and other experiments with pastry prey.
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