Stock Market Crashes: Predictable and Unpredictable and What to Do about Them

William T. Ziemba; Mikhail Zhitlukhin; Sebastien Lleo

ISBN 10: 0000987727 / ISBN 13: 9780000987723

Published by World Scientific Publishing Company, 2017

About this Item

VERY GOOD softcover, no marks in text, tight uncreased spine, clean covers; a gently used copy.

Seller Inventory # 155815

Bibliographic Details

• Title: Stock Market Crashes: Predictable and Unpredictable and What to Do about Them
• Publisher: World Scientific Publishing Company
• Publication Date: 2017
• Language: English
• ISBN 10: 0000987727
• ISBN 13: 9780000987723
• Binding: Soft cover
• Condition: Very Good
• Book Type: Book

About this title

Synopsis

This book presents studies of stock market crashes big and small that occur from bubbles bursting or other reasons. By a bubble we mean that prices are rising just because they are rising and that prices exceed fundamental values. A bubble can be a large rise in prices followed by a steep fall. The focus is on determining if a bubble actually exists, on models to predict stock market declines in bubble-like markets and exit strategies from these bubble-like markets. We list historical great bubbles of various markets over hundreds of years. We present four models that have been successful in predicting large stock market declines of ten percent plus that average about minus twenty-five percent. The bond stock earnings yield difference model was based on the 1987 US crash where the S&P 500 futures fell 29% in one day. The model is based on earnings yields relative to interest rates. When interest rates become too high relative to earnings, there almost always is a decline in four to twelve months. The initial out of sample test was on the Japanese stock market from 1948-88. There all twelve danger signals produced correct decline signals. But there were eight other ten percent plus declines that occurred for other reasons. Then the model called the 1990 Japan huge -56% decline. We show various later applications of the model to US stock declines such as in 2000 and 2007 and to the Chinese stock market. We also compare the model with high price earnings decline predictions over a sixty year period in the US. We show that over twenty year periods that have high returns they all start with low price earnings ratios and end with high ratios. High price earnings models have predictive value and the BSEYD models predict even better.