A Three-Regime Model of Speculative Behaviour: Modelling the Evolution of the S&P 500 Composite Index

@article{Brooks2005ATM,
  title={A Three-Regime Model of Speculative Behaviour: Modelling the Evolution of the S&P 500 Composite Index},
  author={Chris Brooks and Apostolos Katsaris},
  journal={Capital Markets: Market Microstructure},
  year={2005}
}
  • Chris Brooks, Apostolos Katsaris
  • Published 2005
  • Economics
  • Capital Markets: Market Microstructure
  • We examine whether a three-regime model that allows for dormant, explosive and collapsing speculative behaviour can explain the dynamics of the S&P 500. We extend existing models of speculative behaviour by including a third regime that allows a bubble to grow at a steady rate, and propose abnormal volume as an indicator of the probable time of bubble collapse. We also examine the financial usefulness of the three-regime model by studying a trading rule formed using inferences from it, whose… CONTINUE READING
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