XXV Edition

1-2 December 2016"

The Existence of Securities Bubbles and the Relative Banking Context

Sist Federica, LUMSA University
Centoni Marco, LUMSA University

This study aims to (a) detect the bubbles of ten ESMA countries stock price index with a shared method suggested in literature and (b) test the relationship between the presence of bubble and multiple factors have been identified in other researches, as monetary and financial variables, and others not yet used in literature, as ratios explanatory of the banking context. The work answer to the question: on which banking structure variables the regulator should work to avoid the securities bubble that burns value periodically? The share price used to detect the period and the financial variables are from OECD database, while the banking context are from World Bank database and are from 1978 to 2011. The second aim is achieved through the regression (logit) between the presence of bubble, measured with a dummy and the other variables selected. The first results show that the majority of variables are significantly related to the bubble periods: the number of listed companies are significantly related with the presence of a bubble, instead money supply growth and the real short-term interest rate are inversely correlated to the presence of securities bubbles. The application of this study is possible in regulation area, in trading risk management and in asset allocation policy.

Area: Banking

Keywords: securities bubbles; banking

Paper file

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