Social and Behavioral Sciences Commons^™

Asset Price Bubble Identification And Response, Paul Atkinson

Honors Theses and Capstones

This paper investigates the existence of asset price bubbles. It first gives a history of financial crises and asset bubbles around the world throughout history as a background to the issue and then moves into finding the reason why they are able to exist in a market with both rational and irrational participants. Then by looking at the historical data for the United States housing and stock markets sets bubble identification rules based on standard deviation bounds. This method proves to be a very accurate way of identifying bubbles. The best response for both monetary policy authorities and market participants …