Stock Markets, Market Crashes, and Market Bubbles

Andraszewicz, Sandra

doi:10.1007/978-3-030-45500-2_10

Cited by 5 publications

(2 citation statements)

References 121 publications

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“…Financial bubbles and crashes are an omnipresent and recurring phenomenon [6] whose formation has been intensively studied in artificial and real markets [7]. Endogenous bubbles and crashes self-emerge from the interplay of value investors (i.e., investors believing that assets are currently undervalued and will demonstrate a price increase) and noise traders who follow the price momentum.…”

Section: Introductionmentioning

confidence: 99%

Skin conductance predicts earnings in a market bubble-and-crash scenario

Wichary,

Allenbach,

von Helversen

et al. 2023

Preprint

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In financial markets, profit is usually associated with risk-taking, as those who take risks, use the opportunities that markets present. However, during market bubbles, risk-taking might lead to losses, whereas risk aversion can lead to more profit. Emotion-based warning signals might play a role here by helping to recognize when risk aversion is preferable. To study this, we used a trading simulator, where 27 male participants traded on a historical stock price trend during a market bubble-and-crash scenario, and we continuously monitored their skin conductance level. We found that participants earning the most were characterized by an adaptive pattern of risk-taking —they invested much in the asset in the initial phase of the bubble but sold their stocks before the crash. Their skin conductance level was closely associated with the price trend, peaking before the crash started. This suggests that skin conductance provided a bodily warning signal in this group. Moreover, in high earners, skin conductance level correlated negatively with the proportion of stocks, indicating that the high earners used this warning signal to sell stocks. These results underscore the adaptive role of bodily signals in decision-making and elucidate the neural basis of success in uncertain financial markets.

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Section: Introductionmentioning

confidence: 99%

Skin conductance predicts earnings in a market bubble-and-crash scenario

Wichary,

Allenbach,

von Helversen

et al. 2023

Preprint

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“…As the COVID-19 pandemic spread around the world in 2019, the number of confirmed cases soared, the daily death toll in each country continued to increase, the panic reached its climax, and the economies of countries around the world were in dire straits. The performance of the financial market is to sell stocks, stock prices fell sharply [1][2]. In 2020 alone, the U.S. stock market suffered five circuit breakers.…”

Section: Introductionmentioning

confidence: 99%

Why Capital Always Win — A Case Study for Gamestop

Hao¹

2022

EHSS

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A stock market bubble is an economic bubble that occurs in the stock market when market participants push stock prices above their value in some systematic stock valuations. Financial professionals and academics have long been puzzled by the ubiquity and repetition of market bubbles and crashes. In real life, it is common to see mistakes in the reasonable pricing of assets traded in the stock market. This paper aims to explain the behaviors of the stock market by taking GameStop's dramatic stock price change in early 2021 as an example. Firstly, the paper reviews the development history of GameStop and its weaknesses of the time. Secondly, this article focuses on the stock market institutions and retail, the game between the use of the relevant theories of game theory and related data model. Then the article reviewed the why retail investors in the short-term game victory, the victory of the retail is the media, government. Finally, the reasons for the different stock markets under different social forms are discussed. In the current era of economic globalization, changes in the US stock market will lead to changes in the global economy. Taking the 2008 financial crisis as an example, it is very important for the national economy to understand the causes of market changes and stop losses in time.

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Log Periodic Power Analysis of Critical Crashes: Evidence from the Portuguese Stock Market

et al. 2022

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The study of critical phenomena that originated in the natural sciences has been extended to the financial economics’ field, giving researchers new approaches to risk management, forecasting, the study of bubbles and crashes, and many kinds of problems involving complex systems with self-organized criticality (SOC). This study uses the theory of self-similar oscillatory time singularities to analyze stock market crashes. We test the Log Periodic Power Law/Model (LPPM) to analyze the Portuguese stock market, in its crises in 1998, 2007, and 2015. Parameter values are in line with those observed in other markets. This is particularly interesting since if the model performs robustly for Portugal, which is a small market with liquidity issues and the index is only composed of 20 stocks, we provide consistent evidence in favor of the proposed LPPM methodology. The LPPM methodology proposed here would have allowed us to avoid big loses in the 1998 Portuguese crash, and would have permitted us to sell at points near the peak in the 2007 crash. In the case of the 2015 crisis, we would have obtained a good indication of the moment where the lowest data point was going to be achieved.

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Stock Markets, Market Crashes, and Market Bubbles

Cited by 5 publications

References 121 publications

Skin conductance predicts earnings in a market bubble-and-crash scenario

Skin conductance predicts earnings in a market bubble-and-crash scenario

Why Capital Always Win — A Case Study for Gamestop

Log Periodic Power Analysis of Critical Crashes: Evidence from the Portuguese Stock Market

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