Emerging Markets and Stock Market Bubbles: Nonlinear Speculation?

Searching for rational bubble footprints in the Singaporean and Indonesian stock markets

“…Over these sub-periods we do not find evidence of rational bubbles in either Singapore or Indonesia again contradicting the findings of Sarno and Taylor (1999) and Ahmed et al (2010) which were obtained using cointegration and regime-switching tests, respectively. 17 In view of the shortcomings of the cointegration and regime-switching tests discussed earlier, we suggest that no rational bubbles existed in either Singapore or Indonesia over the period 1988 to 2006.…”

“…As we did with monthly returns, we also conducted duration dependence tests on weekly returns over the sub-periods 1988 to 1997 and 1990 to 2006 to compare our results with Sarno and Taylor (1999) and Ahmed et al (2010). Over these sub-periods we do not find evidence of rational bubbles in either Singapore or Indonesia again contradicting the findings of Sarno and Taylor (1999) and Ahmed et al (2010) which were obtained using cointegration and regime-switching tests, respectively.…”

“…We also find that the results of cointegration and regimeswitching tests for rational bubbles conducted earlier by Sarno and Taylor (1999) and Ahmed et al (2010) are not fully consistent with the results from duration dependence tests.…”

Can We Use Volatility to Diagnose Financial Bubbles? Lessons from 40 Historical Bubbles

“…The last column sum ups the credit conditions during each bubble. Johansen and Sornette, 2010;Craig et al, 2003;Bohl et al, 2007 Fearless No 13 Japan Nikkei January 1990 Sato, 1995;Barsky, 2009;Hamao et al, 2003;Werner, Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010 Fearful No 27 Peru IGBVL October 1993 Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010 Fearful Yes 28 Peru IGBVL June 1997 Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010 Fearful Yes 29 Venezuela IBVC October 1997 Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010 Fearless Yes 30 Indonesia JCI January 1994 Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010 Fearful No 31 Indonesia JCI July 1997 Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010 Fearless Yes 32 Malaysia FBMKLCI January 1994 Johansen and Sornette, 2001;Kaufman et al, 2980Kaufman et al, -2001Ahmed et al, 2010;Rangel and Pillay, 2007 Fearless No The top panel of figure 1 shows the 20-day moving average of the historical volatility of the Dow Jones Industrial Average index before (green) and after (red) its peak on September 3, together with the historical price level of the index itself. The grey area represents the one month period after the peak.…”

Rational expectation bubbles: evidence from Hong Kong’s sub-indices

“…By using the Hong Kong Hang Seng Index and the US stock market indexes, Lin and Sornette (2013) demonstrated the feasibility of advance bubble warning to be followed by crashes or extended market downturns. Ahmed et al (2010) have examined daily returns of stock markets in emerging markets including Hong Kong for the absence of nonlinear speculative bubbles. Lehkonen (2010) used the duration test to study Hong Kong's Hang Seng Index and concluded the absence of rational expectation bubbles.…”