The mirror of history: How to statistically identify stock market bubble bursts
Journal of Economic Behavior & Organization(2022)
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.
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Key words
Stock markets,Change-point detection,Bubble burst,Transformation method
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