Dating the timeline of financial bubbles during the subprime crisis
Peter C.B. Phillips,Jun Yu +1 more
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In this article, a new recursive regression methodology is introduced to analyze the bubble characteristics of various financial time series during the subprime crisis, and empirical estimates of the origination and collapse dates suggest a migration mechanism among the financial variables.Abstract:
A new recursive regression methodology is introduced to analyze the bubble characteristics of various financial time series during the subprime crisis. The methods modify a technique proposed in Phillips, Wu, and Yu (2011) and provide a technology for identifying bubble behavior with consistent dating of their origination and collapse. The tests serve as an early warning diagnostic of bubble activity and a new procedure is introduced for testing bubble migration across markets. Three relevant financial series are investigated, including a financial asset price (a house price index), a commodity price (the crude oil price), and one bond price (the spread between Baa and Aaa). Statistically significant bubble characteristics are found in all of these series. The empirical estimates of the origination and collapse dates suggest a migration mechanism among the financial variables. A bubble emerged in the real estate market in February 2002. After the subprime crisis erupted in 2007, the phenomenon migrated selectively into the commodity market and the bond market, creating bubbles which subsequently burst at the end of 2008, just as the effects on the real economy and economic growth became manifest. Our empirical estimates of the origination and collapse dates and tests of migration across markets match well with the general dateline of the crisis put forward in the recent study by Caballero, Farhi, and Gourinchas (2008a).read more
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Deciphering the Liquidity and Credit Crunch 2007-2008
TL;DR: The financial market turmoil in 2007 and 2008 has led to the most severe financial crisis since the Great Depression and threatens to have large repercussions on the real economy as mentioned in this paper The bursting of the housing bubble forced banks to write down several hundred billion dollars in bad loans caused by mortgage delinquencies at the same time the stock market capitalization of the major banks declined by more than twice as much.
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Bitcoin: Medium of Exchange or Speculative Assets?
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Testing for multiple bubbles: historical episodes of exuberance and collapse in the s&p 500
TL;DR: In this paper, a recursive flexible window method was proposed for detecting and dating financial bubbles in real-time data, which is better suited for practical implementation with long historical time series.
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Index Funds, Financialization, and Commodity Futures Markets
Scott H. Irwin,Dwight R. Sanders +1 more
TL;DR: The lack of a direct empirical link between index fund trading and commodity futures prices casts considerable doubt on the belief that index funds fueled a price bubble as mentioned in this paper. But, the data and methods used in these studies are subject to criticisms that limit the confidence one can place in their results.
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Datestamping the Bitcoin and Ethereum bubbles
TL;DR: This paper examined the existence and dates of pricing bubbles in Bitcoin and Ethereum, two popular cryptocurrencies using the (Phillips et al., 2011) methodology and concluded that Bitcoin is almost certainly in a bubble phase.
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