Empirical characterization of a financial bubble

The Institute of Economics will hold a seminar meeting as part of its Seminar Series on Tuesday, June 20, 2023: Rosario Nunzio Mantegna from University of Palermo will present the paper "Empirical characterization of a financial bubble".

Abstract:

The study of financial bubbles is a highly controversial topics in economics and finance. Despite a large number of economic analyses, anecdotal evidence and increased theoretical attention, the quantitative monitoring and modeling of financial bubbles still miss standards broadly accepted by scholars. Our study focuses on the famous dotcom bubble that inflated financial markets during the period 1995-2000. Specifically, we investigate Nokia share ownership during the onset of the bubble and during its aftermath up to 2010 by investigating a unique database that tracks the daily financial ownership of all Finnish legal entities. We document a persistent flow of investment from foreign investors in the Nokia company during the inflation period of the bubble. This is a typical anecdotical scenario observed in the setting of financial bubbles. A second fundamental observation concerns the number of Finnish investors having an open investment position in Nokia at a given day. This number increased more than exponentially during the 1998-2000, reflecting a dramatic raise of attention at a country-wise level during bubble inflation. We exploit the unique combination of studying a multinational company that was among worldwide protagonists during dotcom bubble and a complete coverage of daily financial ownerships for all Finnish investors. The trading decision profile and the distribution of investment gains and losses was strongly inhomogeneous across different categories of investors. Financial professionals and experienced individual investors were better equipped to obtain gains during bubble inflation and limit losses when the bubble bursts. On the contrary, investors with limited financial expertise gained during bubble inflation but incurred in significant losses -- or struggled to limit them -- after the bubble burst.

The Seminar will be held in Aula 5.

For online partecipation use this link.