A case study of speculative financial bubbles in the South African stock market 2003–2006

Wei-Xing Zhou and Didier Sornette

Physica A: Statistical Mechanics and its Applications, 2009, vol. 388, issue 6, 869-880

Abstract: We tested 45 indices and common stocks in the South African stock market for the possible existence of a bubble over the period from January 2003 to May 2006. A bubble is defined by a faster-than-exponential acceleration with significant log-periodic oscillations. These two traits are analyzed using different methods. Sensitivity tests show that the estimated parameters are robust. With the insight of 6 additional months of data since the analysis was performed, we observe that many of the stocks on the South African market experienced an abrupt drop at mid-June 2006, which is compatible with the predicted tc for several of the stocks, but not all. This suggests that the mini-crash that occurred around mid-June of 2006 was only a partial correction, which has resumed into a renewed bubbly acceleration bound to end some time in 2007, similarly to what happened in the US market from October 1997 to August 1998.

Keywords: Econophysics; Financial bubble; Super-exponential acceleration; Log-periodicity; Power-law singularity; African common stocks (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (34)

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Working Paper: A case study of speculative financial bubbles in the South African stock market 2003-2006 (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:388:y:2009:i:6:p:869-880

DOI: 10.1016/j.physa.2008.11.041

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