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When the Bubble is Going to Burst

Jing Chen

University of Northern British Columbia - School of Business

November 1998

There has been constant debate about the predictability of the security markets. We examine the relationship between the prices of a stock and its convertible bond during the Hong Kong stock market bubble of 1997 and its subsequent crash. We find that the price behavior of the share and the convertible bond not only gave a clear signal of the market reversal, but also the minimum range of the market fall. This example offers concrete evidence that the market becomes highly predictable at times and gives us a chance to understand the relationship of the underlying stock and its derivatives during market bubbles.

Number of Pages in PDF File: 20

JEL Classification: G12, G13

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Date posted: December 5, 1998  

Suggested Citation

Chen, Jing, When the Bubble is Going to Burst (November 1998). Available at SSRN: https://ssrn.com/abstract=140766 or http://dx.doi.org/10.2139/ssrn.140766

Contact Information

Jing Chen (Contact Author)
University of Northern British Columbia - School of Business ( email )
Prince George, BC, V2N 4Z9
250-960-6480 (Phone)
250-960-5544 (Fax)
HOME PAGE: http://web.unbc.ca/~chenj/
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