explanation of stock market bubbles and crashes? Name: Yuan Cao SID: 2925215 Email Address: caoy5@uni.coventry.ac.uk TABLE OF CONTENT 1 INTRODUCTION…………………………………………………………..3 2 BUBBLES AND CRASHES…………………………………….………….4 3 SOCIETY AND PSYCHOLOGY………………………………………….5 4 BEHAVIOURAL FINANCE FOR UNDERSTANDING BUBBLES AND CRASHES…………………………………………………………………......7 4.1 Overconfidence……………………………………………………………7 4.2 Representativeness and Momentum………………………………….….9 4.3 Familiarity and Celebrity Stocks………………………………………
The occurrence of stock market bubbles and crashes is often cited as evidence against the efficient market hypothesis. It is argued that new information is rarely, if ever, capable of explaining the sudden and dramatic share price movements observed during bubbles and crashes. Samuelson (1998) distinguished between micro efficiency and macro efficiency. Samuelson took the view that major stock markets are micro efficient in the sense that stocks are (nearly) correctly priced relative to each other
the causes and the consequences of herding behavior of financial traders, emphasizing the impact on financial markets’ efficiency and stability. Moreover, it contributes to formalize the role of policy makers, how they react to herding behavior and what measures they can take to curtail it. This paper is divided into three section: Section 1 introduces herding behavior; Section 2 analyzes origin and consequences of herding and its repercussion on Efficient Market Hypothesis theory; Section 3 focuses
Introduction The purpose of this written assignment is to examine and study how representativeness, familiarity, and social interactions are convoluted in the pronouncements of an investor, and how these comportments can lead to stock market bubbles. There will be three source materials provided to assist with this information, including excerpt from our weekly materials and the textbook, which includes chapters eight and nine. Representativeness The first source of information is from the stockmarketinvesting
financial crisis since the second half of the twentieth century, leading to liquidity shortage in the world’s main financial markets, further influencing the real economy, and sending the world into recession. This crisis primarily stemmed from the subprime mortgage crisis in the U.S., which can be interpreted as the banking emergency triggered by the burst of the real estate market bubble, excessive credit, and abuse of financial derivative instruments (Szyszka, 2011). Most studies about the chief culprit
Introduction The idea of institutional herding has a striking implication for security price volatility. Estimations from the essay ‘Sending the Herd Off the Cliff Edge’suggests that the predominance of herding behavior may explain why the financial system in 1990s had been in crisis for 40 out of the 120 months or 33% of the time (Persaud, 2000). These concerns, along with the increasing stock market ownership of institution investor in comparison to individual investors, is often used as a basis
especially the bursting of bubbles, can have significant adverse effects on the aggregate economy. This was most recently demonstrated by the bursting of the US sub-prime mortgage bubble and the ensuing financial crisis. Furthermore, asset prices in Australia have recently been in the spotlight, as there are concerns about a potential real-estate bubble developing in some metropolitan centres. This paper will outline the theoretical perspectives on asset price bubbles and explain historic examples
the shares forming part of the base case IPO are credited to the issue company account, while the proceeds from the over-allotment component is parked in the special escrow account mentioned above. During Post-Issue/Price Stabilization Period: If stock price after IPO drops below the IPO offer price, then Lead underwriter Escrow Account Pre-IPO Shareholders Investors 15 shares $150 $150 15 shares Lead underwriter Escrow Account Pre-IPO Shareholders Investors 15 shares $150 $150 15 shares
2. The Impact of Bond Market on European Government Debt Problems 2.1. Bond Market The bond market is one of the fixed-income markets that it is deals in with transaction of long term fixed-income securities. Moreover, the bond is one of the financial instruments and then the financial instruments are generally regarded as securities. In the bond market, there are two bonds familiar to mass investors. One is called government bonds, and another one is called corporate bonds. Firstly, as its name
investment analysis technique in an efficient capital market. Fundamental Analysis identifies undervalued or overvalued stocks based on publicly available financial information. It is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. Its goal is to derive a forecast and profit from future price movements. The fundamental attributes of a public firm are • To maximize the stock price value • Monitor and discipline of board of directors