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Forecasting Bubble Bursts: Assessing the Ex-ante Usability of the Log-Periodic Power Law Singularity Model
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.
2020 (English)In: Journal of Business and Applied Social Science, ISSN 2469-6501, Vol. 6, no 2Article in journal, Editorial material (Refereed) Published
Abstract [en]

Speculative bubbles have throughout the times foiled various scholars; many have tried to accurately predict their ends, but few have succeeded. In this study, we examine the robustness and ex-ante usability of the log-periodic power law model in predicting end dates of speculative bubbles on one mature and two emerging financial markets. We have found that the predicted end dates are somewhat dependent on at which point in time the prediction is conducted, especially in regards to at which point in the oscillatory cycle the prediction is conducted. This is mostly due to that predictions are sensitive to their most recent price movements, especially when data is limited and a clear oscillatory pattern is not yet established. We conclude that observing one particular estimation without further context can be misleading. To achieve a sound understanding of and reasonable expectations on how prices might develop it is necessary to follow a bubble as it develops. This study is, to our knowledge, first to examine to what extent the predictions of the model are dependent on at which point in time the predictions are conducted.

Place, publisher, year, edition, pages
2020. Vol. 6, no 2
Keywords [en]
bubble forecasting, financial crisis, stock market crash, log-periodic power law singularity model (LPPLS-model), asset price dynamics.
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-164158DOI: 10.33642/ijbass.v6n2p3OAI: oai:DiVA.org:liu-164158DiVA, id: diva2:1412769
Available from: 2020-03-07 Created: 2020-03-07 Last updated: 2020-04-01Bibliographically approved

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Sjögren, Hans

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • oxford
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More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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  • asciidoc
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