Large swings in real estate prices that end in devastating crashes have been witnessed by many countries in the past two decades. To curtail the damage of these crashes, it is imperative that we understand their causes. This study proposes a model that associates market crashes with periodically collapsing speculative bubbles. Unlike the conventional literature, the identification of the bubble does not rely on assumptions about fundamentals, but on some “fingerprints” of speculation. These fingerprints, theoretically, may also serve as predictors of market crashes. In practice, however, a number of factors may hinder the accuracy of the prediction.
|Number of pages||20|
|Early online date||11 Mar 2010|
|Publication status||Published - Jul 2010|
- market crash
- speculative bubble
- property markets