Financial disasters to hedge funds, bank trading departments and individual speculative traders and investors seem to always occur because of non-diversification in all possible scenarios, being overbet and being hit by a bad scenario. Black swans are the worst type of bad scenario: unexpected...

In this paper, we extend the literature on crash prediction models in three main respects. First, we relate explicitly crash prediction measures and asset pricing models. Second, we present a simple, effective statistical significance test for crash prediction models. Finally, we propose a...

The optimal capital growth strategy or Kelly strategy, has many desirable properties such as maximizing the asympotic long run growth of capital. However, it has considerable short run risk since the utility is logarithmic, with essentially zero Arrow-Pratt risk aversion. Most investors favor a...

We study the land and stock markets in Japan circa 1990 and in 2013. While the Nikkei stock average in the late 1980s and its -48% crash in 1990 is generally recognized as a financial market bubble, a bigger bubble and crash was in the land market. The crash in the Nikkei which started on the...

In this paper, the authors apply a continuous time stochastic process model developed by Shiryaev and Zhutlukhin for optimal stopping of random price processes that appear to be bubbles. By a bubble we mean the rising price is largely based on the expectation of higher and higher future prices....

A reprint of one of the classic volumes on racetrack efficiency, this book is the only one in its field that deals with the racetrack betting market in-depth, containing all the important historical papers on racetrack efficiency. As evidenced by the collection of articles, the understanding of...

I have used four measures that have had considerable success in predicting stock market declines of ten percent or more and average twenty-five percent. Other declines of 5-15% seem to be hard to predict ex ante, while some can be explained ex post. In this paper, I focus on six of the latter...

The period May 1 to the turn of the month of November (last five trading days October) has historically produced negligible returns. The rest of the year (late October to the end of April) has essentially all the year's gains. In this paper we show that there is a statistically significant...

Warren Buffett suggested that the ratio of the market value of all publicly traded stocks to the Gross National Product could identify potential overvaluations and undervaluations in the US equity market. We investigate whether this ratio is a statistically significant predictor of equity market...

In this paper, we extend the literature on crash prediction models in three main ways. First, we explicitly relate crash prediction measures and asset pricing models. Second, we present a simple, effective statistical significance test for crash prediction models. Finally, we propose a...