Sequential monitoring of stock market price changes

Hemei Li, Zhenya Liu and Zhijie Xiao

International Review of Economics & Finance, 2024, vol. 89, issue PA, 156-172

Abstract: In 2016, Eugene Fama mentioned that he wanted a systematic way of identifying and predicting a stock market bubble. This paper develops a statistical method to sequentially monitor the stock market price changes. A new simple boundary function is proposed and asymptotic properties are established. In the empirical application, we successfully detect that the U.S. dot-com bubble occurred around June 1997 using the S&P 500 and Nasdaq indices.

Keywords: Sequential monitoring; Stock market price; Structural breaks; Boundary function (search for similar items in EconPapers)
JEL-codes: C12 C22 C58 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:89:y:2024:i:pa:p:156-172

DOI: 10.1016/j.iref.2023.07.105

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