Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia

The long-term risk caused by the stock market bubble
Kasimir Kaliva, Lasse Koskinen
Abstract
ABSTRACT
In this paper we quantify the risk caused by the crash of a pricing bubble in the US stock market by utilizing a recently introduced econometric bubble model. The skewness and kurtosis are shown to vary widely with the price-dividend ratio. Simulation experiments quantify how the moments and value-at-risk of the predictive distribution depend on the holding period, the price-dividend ratio and inflation. This information is useful in deciding on market timing and needed risk capital. In addition the analysis of higher moments supports the old wisdom that stocks are a more attractive investment in the long run than in the short run.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net