On the maximum drawdown during speculative bubbles

Giulia Rotundo and Mauro Navarra

Papers from arXiv.org

Abstract: A taxonomy of large financial crashes proposed in the literature locates the burst of speculative bubbles due to endogenous causes in the framework of extreme stock market crashes, defined as falls of market prices that are outlier with respect to the bulk of drawdown price movement distribution. This paper goes on deeper in the analysis providing a further characterization of the rising part of such selected bubbles through the examination of drawdown and maximum drawdown movement of indices prices. The analysis of drawdown duration is also performed and it is the core of the risk measure estimated here.

Date: 2006-07, Revised 2006-11
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