Guojin Chen
A financial engineering approach to identify stock market bubble
Chen, Guojin; Yan, Cheng
Authors
Cheng Yan
Abstract
In this paper we adopt an engineering method based on Al-Anaswah and Wilfling, state space model with Markov-switching, to capture the speculative bubbles of stock markets in China and US. We present the VAR log linear asset pricing model in state space model with Markov-switching, so that we can capture the unobservable speculative bubbles. Based on the dataset from Stock markets in China and US, we find empirically that the engineering technique we choose detect the stock markets bubbles effectively, and that the switching probabilities between the surviving and collapsing regimes. In-the-sample and out-of-sample forecasting further support our empirical evidence.
Citation
Chen, G., & Yan, C. (2011). A financial engineering approach to identify stock market bubble. Systems Engineering Procedia, 2, 153-162. https://doi.org/10.1016/j.sepro.2011.10.018
Journal Article Type | Article |
---|---|
Publication Date | Dec 16, 2011 |
Deposit Date | Oct 20, 2015 |
Publicly Available Date | Mar 28, 2024 |
Journal | Systems Engineering Procedia |
Print ISSN | 2211-3819 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 2 |
Pages | 153-162 |
DOI | https://doi.org/10.1016/j.sepro.2011.10.018 |
Keywords | Bubble, VAR-loglinear asset pricing, State space model with Markov-switching, Financial engineering. |
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© 2011 Published by Elsevier B.V. Open access under CC BY-NC-ND license.
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