The Capital Spectator is sneaking out this afternoon for one final summer holiday for the remainder of the week. The usual fun resumes on Monday, August 18. Meantime… cheers!

The last decade or so has witnessed a productive run of research on the ever-topical issue of detecting market bubbles in real time. Quite a lot of attention has recently been focused on a series of research studies by an academic team that includes Peter Phillips, Jun Yu and others, and rightly so. Last year’s working paper “Testing for Multiple Bubbles 1: Historical Episodes of Exuberance and Collapse in the S&P 500”, for instance, breaks new ground with econometric testing, outlining what appears to be a powerful system for detecting the arrival of irrational exuberance in asset pricing. As Fulcrum Asset Management noted earlier this year in a review of revised bubble analytics: “Recent advances in econometric methodology allow us to detect explosive dynamics in asset prices.”
Continue reading →