Posts Tagged ‘Burbuja


Paper: El rol del Default en Macroeconomía

The Role of Default in Macroeconomics

What is the main limitation of much modern macro-economic theory, among the failings pointed out by William R. White at the 2010 Mayekawa Lecture? We argue that the main deficiency is a failure to incorporate the possibility of default, including that of banks, into the core of the analysis. With default assumed away, there can be no role for financial intermediaries, for financial disturbances, or even for money. Models incorporating defaults are, however, harder to construct, in part because the representative agent fiction must be abandoned. Moreover, financial crises are hard to predict and to resolve. All of the previously available alternatives for handling failing systemically important financial institutions (SIFIs) are problematical. We end by discussing a variety of current proposals for improving the resolution of failed SIFIs.

Link al Paper


Paper: Formación de Burbujas

Market efficiency, anticipation and the formation of bubbles-crashes

A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of its own private information, the public information and its own analysis. It then adjusts such opinion through the market as it observes sequentially the behavior of a group of random selection of other agents. Its choice is then determined by a local majority rule including itself. Whenever the selected group is at a tie, i.e., it is undecided on what to do, the choice is determined by the local group belief with respect to the anticipated trend at that time. These local adjustments create a dynamic that leads the market price formation. In case of balanced anticipations the market is found to be efficient in being successful to make the “right price” to emerge from the sequential aggregation of all the local individual informations which all together contain the fundamental value. However, when a leading optimistic belief prevails, the same efficient market mechanisms are found to produce a bullish dynamic even though most agents have bearish private informations. The market yields then a wider and wider discrepancy between the fundamental value and the market value, which in turn creates a speculative bubble. Nevertheless, there exists a limit in the growing of the bubble where private opinions take over again and at once invert the trend, originating a sudden bearish trend. Moreover, in the case of a drastic shift in the collective expectations, a huge drop in price levels may also occur extremely fast and puts the market out of control, it is a market crash.

Link al Paper


¿rule of thumb para burbujas o nos ponemos a trabajar?

Sea por el IPO de Linkedin, los commodities u otro activo, la pregunta sobre cómo identificar -ex ante- una burbuja se transforma (cada tanto) en el Santo Grial.

En esta ocacion -y gracias a Abnormal Returns– ofrece una rule of thumb (con 14 items) para identificar una burbuja en tiempo real.

1. Standard Deviations of Valuation: Look at traditional metrics –  valuations, P/E, price to sales, etc. — to rise two or even three standard deviations away from the historical mean.

2. Significantly elevated returns:  The S&P500 returns in the 1990s were far beyond what one could reasonably expect on a sustainable basis. The years around Greenspan’s “Irrational Exuberance” speech suggest that a bubble was forming:

1995    37.58
1996    22.96
1997    33.36
1998    28.58
1999    21.04

And the Nasdaq numbers were even better.

3. Excess leverage: Every great financial bubble has at its root easy money and rampant speculation. Find the leverage, and speculation won’t be too far behind.


Por otro lado, All About Alpha invita a mirar en la actual bibliografia dura en la materia (Jarrow) posibles herramientas de trading.

Bubbles can create investment opportunities or act as predators for risk managers. While much academic research previously focused on how they formed, papers like this are beginning to provide toolkits for traders and risk managers to see, in real-time, the formation and presence of bubbles in a range of asset classes.


Paper: Lunes de Burbujas

Is There a Bubble in LinkedIn’s Stock Price?

Recent academic work has developed a method to determine, in real time, if a given stock is exhibiting a price bubble. Currently there is speculation in the nancial press concerning the existence of a price bubble in the aftermath of the recent IPO of LinkedIn. We analyze stock price tick data from the short lifetime of this stock through May 24, 2011, and we nd that LinkedIn has a price bubble.

Link al Paper


Infograma du Jour: ♫ I’m Forever Blowing Bubbles ♫

(Fuente: New York Mag, via Abnormal Returns)


Finanzas 101: burbujas

Vox tiene un post sobre el origen y las implicaciones de las burbujas en el precio de ciertos activos. Parte desde la clásica pregunta: ¿Que es una burbuja?; para terminar enumerando los avances en los modelos que buscan explicarlas.


Despite the recurrent nature of bubbles and their macroeconomic implications, however, we still lack a stylised model to answer the basic questions:

  • What is the origin of bubbly episodes?
  • Why are they unpredictable?
  • How do bubbles affect consumption, the capital stock, and output?




Tabla du Jour: ¿Burbuja 2011? Debatan…

(Fuente: Surly Trader)


Paper: Burbujas y el hecho de ser credulo

Bubbles, gullibility, and other challenges for economics, psychology, sociology, and information sciences

Gullibility is the principal cause of bubbles. Investors and the general public get snared by a “beautiful illusion” and throw caution to the wind. Attempts to identify and control bubbles are complicated by the fact that the authorities who might naturally be expected to take action have often (especially in recent years) been among the most gullible, and were cheerleaders for the exuberant behavior. Hence what is needed is an objective measure of gullibility.

This paper argues that it should be possible to develop such a measure. Examples demonstrate, contrary to the efficient market dogma, that in some manias, even top business and technology leaders fall prey to collective hallucinations and become irrational in objective terms. During the Internet bubble, for example, large classes of them first became unable to comprehend compound interest, and then lost even the ability to do simple arithmetic, to the point of not being able to distinguish 2 from 10. This phenomenon, together with advances in analysis of social networks and related areas, points to possible ways to develop objective and quantitative tools for measuring gullibility and other aspects of human behavior implicated in bubbles. It cannot be expected to infallibly detect all destructive bubbles, and may trigger false alarms, but it ought to alert observers to periods where collective investment behavior is becoming irrational.

The proposed gullibility index might help in developing realistic economic models. It should also assist in illuminating and guiding decision–making.

Link al Paper


Paper: Analizando la burbuja inmobiliaria norteamericana

Reasonable People Did Disagree: Optimism and PessimismAbout the U.S. Housing Market Before the Crash

Understanding the evolution of real-time beliefs about house price appreciation is central to understanding the U.S. housing crisis. At the peak of the recent housing cycle, both borrowers and lenders appealed to optimistic house price forecasts to justify undertaking increasingly risky loans. Manymobservers have argued that these rosy forecasts ignored basic theoretical and empirical evidence that pointed to a massive overvaluation of housing and thus to an inevitable and severe price decline. We revisit the boom years and show that the economics profession provided little such countervailing evidence at the time. Many economists, skeptical that a bubble existed, attempted to justify the historic run-up in housing prices based on housing fundamentals. Other economists were more uncertain, pointing to some evidence of bubble-like behavior in certain regional housing markets. Even these more skeptical economists, however, refused to take a conclusive position on whether a bubble existed. The small number of economists who argued forcefully for a bubble often did so years before the housing market peak, and thus lost a fair amount of credibility, or they make arguments fundamentally at odds with the data even ex post. For example, some economists suggested that cities where new construction was limited by zoning regulations or geography were particularly “bubble-prone,” yet the data shows that the cities with the biggest gyrations in house prices were often those at the epicenter of the new construction boom. We conclude by arguing that economic theory provides little guidance as to what should be the “correct” level of asset prices —including housing prices. Thus, while optimistic forecasts held by many market participants in 2005 turned out to be inaccurate, they were not ex ante unreasonable.

Link al Paper

¿Si Explota una Burbuja, nacen n “burbujitas”?

The BBC reports physicists have just discovered that, under certain (liquid, ahem) conditions, bursting bubbles don’t just disappear. No, instead they create lots of smaller ‘daughter’ bubbles, which then go on to create even littler bubbles, until they get so small they rupture into tiny aerosol droplets, which are eventually absorbed into the atmosphere.

(Fuente: FT Alphaville)

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July 2020



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