Bulls, bears, bubbles, and bankruptcy: what have we learned?

Melissa Woodley

Chapter 11 in Understanding Investment Risk and Return, 2025, pp 240-261 from Edward Elgar Publishing

Abstract: This chapter examines extreme outcomes in returns and their causes. Investors who are students of market history may notice that stock prices tend to move in tandem, with the general flow of market returns moving in the same direction for extended periods. Occasionally, stock prices increase dramatically like bubbles, only to fall or pop equally dramatically. At other times, investors who ride a dramatic increase in a stock's price are rewarded as the stock maintains the new, higher value. One of the worst outcomes for investors is that firms also tend to file for corporate bankruptcy in waves, and shareholders of those companies often see their investments evaporate. This chapter explores the underlying causes of these market regimes and the latest evidence on how investors may seek signs of abrupt changes to the market landscape.

Keywords: Market regimes; Extreme outcomes; Bubbles; Corporate bankruptcy; Market landscape market history (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035339716
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