The Lifetime of a Financial Bubble
25 Pages Posted: 16 Jun 2015 Last revised: 8 Apr 2016
Date Written: March 17, 2016
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.
Keywords: Financial Bubbles, Bubble Lifetimes, Strict Local Martingales, Generalized Gamma Distributions
JEL Classification: G100, G120, C810
Suggested Citation: Suggested Citation