Price bubbles and financial markets efficiency Cover Image

Ценови балони и ефективност на финансовите пазари
Price bubbles and financial markets efficiency

Author(s): Doncho Donev
Subject(s): Economy, Financial Markets
Published by: Институт за икономически изследвания при Българска академия на науките
Keywords: price bubbles; efficient markets; behavioral finance; Sofix index; emerging markets; sychological biases

Summary/Abstract: This article presents the development of investment theories after the age of the prevailing Modern Portfolio Theory and Capital Asset Pricing Model. It starts with a review of the main theoretical and empirical presumptions of the Efficient Market Hypothesis. The emergence of behavioral finance is monitored, focusing on its contribution to the investment theory and practice. A special attention is paid on the speculative price bubbles. The paper reveals the prerequisites for their emergence, the phases through which a typical price bubble passes, and the methods for calculation of the probability for their collapse. The securities with an infinite maturity are highlighted. An example for a price bubble on the Bulgarian Stock Exchange is investigated in details. Therefore the historical performance of the main Sofix stock index is examined.

  • Issue Year: 2017
  • Issue No: 1
  • Page Range: 115-131
  • Page Count: 17
  • Language: Bulgarian