Emily J. Whitehouse
Real-Time Monitoring of Bubbles and Crashes
Whitehouse, Emily J.; Harvey, David I.; Leybourne, Stephen J.
Authors
Professor DAVID HARVEY dave.harvey@nottingham.ac.uk
PROFESSOR OF ECONOMETRICS
Professor STEVE LEYBOURNE steve.leybourne@nottingham.ac.uk
PROFESSOR OF ECONOMETRICS
Abstract
Given the financial and economic damage that can be caused by the collapse of an asset price bubble, it is of critical importance to rapidly detect the onset of a crash once a bubble has been identified. We develop a real-time monitoring procedure for detecting a crash episode in a time series. We adopt an autoregressive framework, with bubble and crash regimes modelled by explosive and stationary dynamics, respectively. The first stage of our approach is to monitor for a bubble; conditional on which, we monitor for a crash in real time as new data emerges. Our crash detection procedure employs a statistic based on the different signs of the means of the first differences associated with explosive and stationary regimes, and critical values are obtained using a training period of data. We show that the procedure has desirable asymptotic properties in terms of its ability to rapidly detect a crash while never indicating a crash earlier than one occurs. Monte Carlo simulations further demonstrate that our procedure can offer a well-controlled false positive rate during a bubble regime. Application to the US housing market demonstrates the efficacy of our procedure in rapidly detecting the house price crash of 2006.
Citation
Whitehouse, E. J., Harvey, D. I., & Leybourne, S. J. (2023). Real-Time Monitoring of Bubbles and Crashes. Oxford Bulletin of Economics and Statistics, 85(3), 482-513. https://doi.org/10.1111/obes.12540
Journal Article Type | Article |
---|---|
Acceptance Date | Nov 16, 2022 |
Online Publication Date | Jan 27, 2023 |
Publication Date | 2023-06 |
Deposit Date | Nov 23, 2022 |
Publicly Available Date | Jan 28, 2025 |
Journal | Oxford Bulletin of Economics and Statistics |
Print ISSN | 0305-9049 |
Electronic ISSN | 1468-0084 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 85 |
Issue | 3 |
Pages | 482-513 |
DOI | https://doi.org/10.1111/obes.12540 |
Keywords | Real-time monitoring; Bubble; Crash; Explosive autoregression; Stationary autoregression |
Public URL | https://nottingham-repository.worktribe.com/output/14034210 |
Publisher URL | https://onlinelibrary.wiley.com/doi/10.1111/obes.12540 |
Files
Real-Time Monitoring of Bubbles and Crashes
(1.1 Mb)
PDF
Publisher Licence URL
https://creativecommons.org/licenses/by/4.0/
You might also like
A new heteroskedasticity-robust test for explosive bubbles
(2024)
Journal Article
Improved tests for stock return predictability
(2023)
Journal Article
Bonferroni Type Tests for Return Predictability and the Initial Condition
(2023)
Journal Article
Testing for Co-explosive Behaviour in Financial Time Series
(2022)
Journal Article
Downloadable Citations
About Repository@Nottingham
Administrator e-mail: discovery-access-systems@nottingham.ac.uk
This application uses the following open-source libraries:
SheetJS Community Edition
Apache License Version 2.0 (http://www.apache.org/licenses/)
PDF.js
Apache License Version 2.0 (http://www.apache.org/licenses/)
Font Awesome
SIL OFL 1.1 (http://scripts.sil.org/OFL)
MIT License (http://opensource.org/licenses/mit-license.html)
CC BY 3.0 ( http://creativecommons.org/licenses/by/3.0/)
Powered by Worktribe © 2025
Advanced Search