Shakeouts and market crashes
By: Alessandro Barbarino, Boyan Jovanovic.
Contributors: Jovanovic, Boyan, 1951-; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10556; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10556.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Stocks -- Prices -- Mathematical models.; Financial crises -- Mathematical models.
Description: "Stock-market crashes tend to follow run-ups in prices.  These episodes look like bubbles that gradually inflate and then suddenly burst.  We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain.  Two conditions are sufficient for this to happen: A declining hazard rate in the prior distribution over market size and a positively sloped supply of capital to the industry.  For the period 1971-2001 we fit the model to the Telecom sector"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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