Abstract
We combine both a mathematical analysis of financial bubbles and a statistical procedure for determining when a given stock is in a bubble, with an analysis of a large data set, in order to compute the empirical distribution of the lifetime of financial bubbles. We find that it follows a generalized gamma distribution, and we provide estimates for its parameters. We also perform goodness of fit tests, and we provide a derivation, within the context of bubbles, that explains why the generalized gamma distribution might be the natural one to expect for the lifetimes of financial bubbles.
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Acknowledgments
We wish to thank an anonymous referee and the editor Frank Riedel for helpful comments and observations which have improved the paper. A question from Bob Jarrow led to our reporting the actual number of bubbles we observed during the 13 year period 2000 to 2014 (see Sect. 3). Supported in part by NSF Grant DMS-1308483.
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Obayashi, Y., Protter, P. & Yang, S. The lifetime of a financial bubble. Math Finan Econ 11, 45–62 (2017). https://doi.org/10.1007/s11579-016-0170-z
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DOI: https://doi.org/10.1007/s11579-016-0170-z