Ramanan, Sisir (2016) Essays in asset price bubbles. PhD.
This paper studies asset price bubbles in a continuous time model using the local martingale framework. Providing careful definitions of the asset's market and fundamental price, we characterize all possible price bubbles in an incomplete market satisfying the “no free lunch with vanishing risk (NFLVR)” and “no dominance” assumptions. We show that the two leading models for bubbles as.
Bubbles mostly develop in settings with high price volatility and in markets where it is difficult to calculate the true value of a security. In fixed income markets, arbitrage is remarkably easy and nearly riskless. On the contrary, in equity and housing markets it is much harder to detect the true value of a security. The higher volatility increases fundamental risk, which deters risk.
Essays on bubbles and crashes in experimental asset markets Author: Zhang, Kun Awarding Body:. thus become an attractive technique for studying asset market price efficiency. This dissertation consist three essays, all of which devoted to experimental asset markets. The first essay explores the role of liquidity on the mispricing of an asset. This issue has been the subject of Kirchler et.
Asset Price Bubbles: Real Estate Markets Thesis details Notice: I hereby declare that I am aware that the information acquired from theses published by Charles University may not be used for commercial purposes or may not be published for educational, scientific or other creative activities as activities of person other than the author.
Financial crises are often preceded by asset and credit booms that eventually turn into busts. Many theories focusing on the sources of crises have recognized the importance of booms in asset and credit markets. However, explaining why asset price bubbles or credit booms are.
Bubbles in asset markets are continuous increasing prices far above its fundamental value (FV), followed by a crash, the burst of the bubble. Since the FV of an asset is usually not exactly observable some deviation from that “true value” does always exist. Thus, there have been thousand of small bubbles in the past, but normally they are not called bubble. This name is only given to.
The second contribution is the use of TAR simulations to show that the tests which try to detect bubbles in asset prices lose a substantial amount of power when the asset price spends some time in the mean reverting state in addition to being in the explosive and random walk states. The third contribution of this article is the provision of a framework using TAR models which acts as a metric.