Stock market bubbles and anti-bubbles

Martin B. Tarlie, Georgios Sakoulis and Roy Henriksson

International Review of Financial Analysis, 2022, vol. 81, issue C

Abstract: Using a simple model of equity valuation, we define stock market bubbles and anti-bubbles as periods in which the dynamics of valuation is temporarily explosive. We identify a mechanism for the creation and destruction of bubbles and anti-bubbles that depends on the interaction between valuation and expected change in corporate profitability. Topically, we find that valuation dynamics are explosive in 2017, suggesting the possible formation of an equity bubble in the US.

Keywords: Asset pricing; Bubbles; Multiple bubbles; Price explosiveness; Explosive autoregression (search for similar items in EconPapers)
JEL-codes: C22 G10 G12 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:81:y:2022:i:c:s1057521918302138

DOI: 10.1016/j.irfa.2018.07.012

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