The protection of minority shareholders in Cameroon is an ancient weakness recognized of plaguing the Cameroon commercial scene from the existence of the concept itself. The situation under English law was regulated by the received English law under the Common law regime. This application was by virtue of section 11 of the Southern Cameroon High Court Law (SCHCL) of 1955. What upheld in Nigeria was hitherto applied in the then West Cameroon since it was administered as an integral part of Nigeria. In French Cameroon, the received business laws from France were applicable. These laws were relevant within the territory until later appealed with the coming of the Organisation for the Harmonisation of Business Laws in Africa known by its French acronym OHADA. Those earlier laws accorded very little attention to protection of the minority shareholders in commercial companies. That was due to slow commercial development at that moment. The ensuing results of this research reveals that, the raison d’être of low performance of some companies in Cameroon, is due to the fact that, there has been inadequate measures as well as ineffective Implementation of the laws regulating the protection of minority shareholders owing to the fact that there exist several challenges and difficulties in the Implementation of these laws. The challenges faced by the minority have worsened because even the protection provided by the laws is difficult to implement and at times very expensive to undertake, reducing the shareholders’ proprietary rights. In all these, this paper has proffered recommendations that ameliorate the conditions of minority shareholders in commercial companies if taken into consideration.
{"title":"Challenges Faced by Minority Shareholders in Commercial Companies in Cameroon: A Legal Analysis","authors":"Ntoko Ntonga Rene, M. Tanyi","doi":"10.2139/ssrn.3887581","DOIUrl":"https://doi.org/10.2139/ssrn.3887581","url":null,"abstract":"The protection of minority shareholders in Cameroon is an ancient weakness recognized of plaguing the Cameroon commercial scene from the existence of the concept itself. The situation under English law was regulated by the received English law under the Common law regime. This application was by virtue of section 11 of the Southern Cameroon High Court Law (SCHCL) of 1955. What upheld in Nigeria was hitherto applied in the then West Cameroon since it was administered as an integral part of Nigeria. In French Cameroon, the received business laws from France were applicable. These laws were relevant within the territory until later appealed with the coming of the Organisation for the Harmonisation of Business Laws in Africa known by its French acronym OHADA. Those earlier laws accorded very little attention to protection of the minority shareholders in commercial companies. That was due to slow commercial development at that moment. The ensuing results of this research reveals that, the raison d’être of low performance of some companies in Cameroon, is due to the fact that, there has been inadequate measures as well as ineffective Implementation of the laws regulating the protection of minority shareholders owing to the fact that there exist several challenges and difficulties in the Implementation of these laws. The challenges faced by the minority have worsened because even the protection provided by the laws is difficult to implement and at times very expensive to undertake, reducing the shareholders’ proprietary rights. In all these, this paper has proffered recommendations that ameliorate the conditions of minority shareholders in commercial companies if taken into consideration.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130070754","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we consider a multivariate shortfall risk measure with scenario-dependent allocation weights and examine its properties such as convexity and quasi-convexity. For fixed allocation weights, we show that the resulting risk measure is a convex systemic risk measure in which case the property of translation invariance is dependent on the allocation weights. However, if the allocation weights are chosen optimally on a feasible set, then the resulting risk measure is a quasi-convex systemic risk measure. To evaluate the systemic risk of a financial system with the proposed risk measure computationally, we reformulate it as a two-stage stochastic program which is a finite convex program when the underlying uncertainty is discretely distributed. In the case when the uncertainty is continuously distributed, we propose a polynomial decision rule to tackle the semi-infinite two-stage stochastic program which restricts the scenario-dependent allocation weights to be a class of polynomials of the underlying uncertainty parameters and subsequently reformulate the evaluation problem as a tractable optimization problem. Some convergence results are established for the approximation scheme. Moreover, we apply the proposed risk measure to capital allocation problem and introduce scenario-dependent allocation strategy and deterministic allocation strategy. Finally, we carry out some preliminary tests on the proposed computational schemes for a continuous system, a discrete system and a capital allocation example for a life insurance company.
{"title":"Optimal Scenario-Dependent Multivariate Shortfall Risk Measure and its Application in Capital Allocation","authors":"Wei Wang, Huifu Xu, Tiejun Ma","doi":"10.2139/ssrn.3849125","DOIUrl":"https://doi.org/10.2139/ssrn.3849125","url":null,"abstract":"In this paper, we consider a multivariate shortfall risk measure with scenario-dependent allocation weights and examine its properties such as convexity and quasi-convexity. For fixed allocation weights, we show that the resulting risk measure is a convex systemic risk measure in which case the property of translation invariance is dependent on the allocation weights. However, if the allocation weights are chosen optimally on a feasible set, then the resulting risk measure is a quasi-convex systemic risk measure. To evaluate the systemic risk of a financial system with the proposed risk measure computationally, we reformulate it as a two-stage stochastic program which is a finite convex program when the underlying uncertainty is discretely distributed. In the case when the uncertainty is continuously distributed, we propose a polynomial decision rule to tackle the semi-infinite two-stage stochastic program which restricts the scenario-dependent allocation weights to be a class of polynomials of the underlying uncertainty parameters and subsequently reformulate the evaluation problem as a tractable optimization problem. Some convergence results are established for the approximation scheme. Moreover, we apply the proposed risk measure to capital allocation problem and introduce scenario-dependent allocation strategy and deterministic allocation strategy. Finally, we carry out some preliminary tests on the proposed computational schemes for a continuous system, a discrete system and a capital allocation example for a life insurance company.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"87 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132022058","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Although Central Asian countries such as Kyrgyzstan have promised to work with Chinese companies as they show growing interest in entering the region in light of the Belt and Road Initiative, considerable risks remain. Systemic political fragility and growing anti-China public sentiment in Kyrgyzstan pose considerable threats to investment success. Prospective Chinese investors can better navigate the non-business risks in the regulatory and social contexts through aligning their business objectives well with the incentives and needs of both the Kyrgyz government and local communities.
{"title":"Navigating Investments in Central Asia as Chinese Investors: A Case Study of Kyrgyzstan","authors":"Boguang Yang","doi":"10.2139/ssrn.3851415","DOIUrl":"https://doi.org/10.2139/ssrn.3851415","url":null,"abstract":"Although Central Asian countries such as Kyrgyzstan have promised to work with Chinese companies as they show growing interest in entering the region in light of the Belt and Road Initiative, considerable risks remain. Systemic political fragility and growing anti-China public sentiment in Kyrgyzstan pose considerable threats to investment success. Prospective Chinese investors can better navigate the non-business risks in the regulatory and social contexts through aligning their business objectives well with the incentives and needs of both the Kyrgyz government and local communities.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122279747","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper assesses the potential impact of the European Union Emissions Trading System (EU ETS) on firm productivity. We estimate a stylized version of the neo-Schumpeterian model, which incorporates innovation and productivity catch-up as two potential sources of firm’s productivity growth, while at the same time accounting for persistent productivity dispersion within industries. This dynamic model allows us to differentiate the potential effects of the EU ETS on total factor productivity (TFP) depending on the level of firms’ technological advancement. The identification approach is based on a difference-in-difference approach exploiting the incomplete participation requirements of the EU ETS and the rich panel structure of firm-level data for eight EU countries from 2002 to 2012. We find evidence that the policy effects on TFP are highly heterogeneous and depend on the distance to the technological frontier, measured as the highest TFP in each year-industry. Productivity effects are positive for firms that are close to the frontier, but they turn negative for firms operating far behind the frontier.
{"title":"Catching Up and Falling Behind: Cross-country Evidence on the Impact of the EU ETS on Firm Productivity","authors":"Michael Themann, Nicolas Koch","doi":"10.2139/ssrn.3834075","DOIUrl":"https://doi.org/10.2139/ssrn.3834075","url":null,"abstract":"This paper assesses the potential impact of the European Union Emissions Trading System (EU ETS) on firm productivity. We estimate a stylized version of the neo-Schumpeterian model, which incorporates innovation and productivity catch-up as two potential sources of firm’s productivity growth, while at the same time accounting for persistent productivity dispersion within industries. This dynamic model allows us to differentiate the potential effects of the EU ETS on total factor productivity (TFP) depending on the level of firms’ technological advancement. The identification approach is based on a difference-in-difference approach exploiting the incomplete participation requirements of the EU ETS and the rich panel structure of firm-level data for eight EU countries from 2002 to 2012. We find evidence that the policy effects on TFP are highly heterogeneous and depend on the distance to the technological frontier, measured as the highest TFP in each year-industry. Productivity effects are positive for firms that are close to the frontier, but they turn negative for firms operating far behind the frontier.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133650706","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
L. Ceballos, Elı́as Albagli, S. Claro, Damián Romero
We develop a model where foreign investors in domestic markets react partially to deviations from a UIP condition for long-term bonds. The model predicts that the sign between yield differentials and exchange rate movements is conditional on the source of shocks. Using event studies for identification, we test the model in a sample of 24 developed and emerging economies, finding a UIP-consistent correlation for monetary shocks, but the opposite around episodes of large market uncertainty. The model predicts that exchange rate stabilization policies, prevalent among emerging countries, weaken both correlations, which we confirm in the data.
{"title":"UIP: A Partial Reconciliation from Event Studies","authors":"L. Ceballos, Elı́as Albagli, S. Claro, Damián Romero","doi":"10.2139/ssrn.3830716","DOIUrl":"https://doi.org/10.2139/ssrn.3830716","url":null,"abstract":"We develop a model where foreign investors in domestic markets react partially to deviations from a UIP condition for long-term bonds. The model predicts that the sign between yield differentials and exchange rate movements is conditional on the source of shocks. Using event studies for identification, we test the model in a sample of 24 developed and emerging economies, finding a UIP-consistent correlation for monetary shocks, but the opposite around episodes of large market uncertainty. The model predicts that exchange rate stabilization policies, prevalent among emerging countries, weaken both correlations, which we confirm in the data.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128124501","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Alina Bobașu, André Geis, Lucia Quaglietti, Martino Ricci
This paper sheds light on the impact of global macroeconomic uncertainty on the euro area economy. We build on the methodology proposed by Jurado et al. (2015) and estimate global as well as country-specific measures of economic uncertainty for fifteen key euro area trade partners and the euro area. Our measures display a clear counter-cyclical pattern and line up well to a wide range of historical events generally associated with heightened uncertainty. In addition, following Pier and Podstawski (2018), we estimate a Proxy SVAR where we instrument uncertainty shocks with changes in the price of gold around specific past events. We find that, historically, global uncertainty shocks have been important drivers of fluctuations in euro area economic activity, with one standard deviation increase in the identified uncertainty shock subtracting around 0.15 percentage points from euro area industrial produc-tion on impact.
{"title":"Tracking Global Economic Uncertainty: Implications for the Euro Area","authors":"Alina Bobașu, André Geis, Lucia Quaglietti, Martino Ricci","doi":"10.2139/ssrn.3834416","DOIUrl":"https://doi.org/10.2139/ssrn.3834416","url":null,"abstract":"This paper sheds light on the impact of global macroeconomic uncertainty on the euro area economy. We build on the methodology proposed by Jurado et al. (2015) and estimate global as well as country-specific measures of economic uncertainty for fifteen key euro area trade partners and the euro area. Our measures display a clear counter-cyclical pattern and line up well to a wide range of historical events generally associated with heightened uncertainty. In addition, following Pier and Podstawski (2018), we estimate a Proxy SVAR where we instrument uncertainty shocks with changes in the price of gold around specific past events. We find that, historically, global uncertainty shocks have been important drivers of fluctuations in euro area economic activity, with one standard deviation increase in the identified uncertainty shock subtracting around 0.15 percentage points from euro area industrial produc-tion on impact.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114320410","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper explores whether foreign intermediaries stabilise or destabilise lending to the real economy in the presence of sovereign stress in the domestic economy and abroad. Tensions in the government debt market may lead to serious disruptions in the provision of lending (i.e., the so-called “doom loop”). In this context, the presence of foreign banks poses a fundamental, yet unexplored, trade-off. On the one hand, domestic sovereign shocks are broadly inconsequential for the lending capacity of foreign banks, given that their funding conditions are not hampered by such shocks. On the other, these intermediaries may react more harshly than domestic banks to a deterioration in local loan risk and demand conditions. We exploit granular and confidential data on euro area banks operating in different countries to assess this trade-off. Overall, the presence of foreign lenders is found to stabilise lending, thus mitigating the doom loop. JEL Classification: E5, G21
{"title":"Foreign Banks and the Doom Loop","authors":"Ugo Albertazzi, Jacopo Cimadomo, Nicolò Maffei-Faccioli","doi":"10.2866/44105","DOIUrl":"https://doi.org/10.2866/44105","url":null,"abstract":"This paper explores whether foreign intermediaries stabilise or destabilise lending to the real economy in the presence of sovereign stress in the domestic economy and abroad. Tensions in the government debt market may lead to serious disruptions in the provision of lending (i.e., the so-called “doom loop”). In this context, the presence of foreign banks poses a fundamental, yet unexplored, trade-off. On the one hand, domestic sovereign shocks are broadly inconsequential for the lending capacity of foreign banks, given that their funding conditions are not hampered by such shocks. On the other, these intermediaries may react more harshly than domestic banks to a deterioration in local loan risk and demand conditions. We exploit granular and confidential data on euro area banks operating in different countries to assess this trade-off. Overall, the presence of foreign lenders is found to stabilise lending, thus mitigating the doom loop. JEL Classification: E5, G21","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"87 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126977938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using corporate data in 19 countries that experienced democracy status transitions between 1983 and 2017, we find that firm investment decreases by over 30% following democratization. This negative democracy-investment relationship is driven by higher employee welfare and regulatory costs and is stronger for politically connected firms, financially unconstrained firms and in less corrupted countries. The firm investment drop is also due primarily to the reduced investment inefficiency that accompanies higher post-democratization firm profitability, valuation, and stock return. The initial drop has a duration of only two years, and firm investment eventually increases in the fifth year after democratization. Several robustness tests and IV regressions further confirm our main results.
{"title":"Is Democracy Good for Corporate Investment?","authors":"Yan Li, Youan Wang, Zigan Wang, Q. Yin","doi":"10.2139/ssrn.3818257","DOIUrl":"https://doi.org/10.2139/ssrn.3818257","url":null,"abstract":"Using corporate data in 19 countries that experienced democracy status transitions between 1983 and 2017, we find that firm investment decreases by over 30% following democratization. This negative democracy-investment relationship is driven by higher employee welfare and regulatory costs and is stronger for politically connected firms, financially unconstrained firms and in less corrupted countries. The firm investment drop is also due primarily to the reduced investment inefficiency that accompanies higher post-democratization firm profitability, valuation, and stock return. The initial drop has a duration of only two years, and firm investment eventually increases in the fifth year after democratization. Several robustness tests and IV regressions further confirm our main results.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129717023","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Do asset price shocks and credit premia affect sovereign risk premia? Sovereign credit risk in developed countries was essentially non-existent prior to 2009. We find new factors suggesting that a part of sovereign risk premia is exogenously determined. We capture a novel phase synchronization among asset prices and credit premia that is associated with an increase in the cost of public debt. We start by showing that the financial and economic impact of credit premia, and asset price shocks have changed over time, even though the magnitude of the shocks is similar across different episodes. To explain this change, we suggest that the magnitude of the effect is different in 2008 because there is “phase synchronization” where financial cycles (à la Claessens, Kose, and Terrones, 2012) and credit cycles are synchronized in an unprecedented boom and bust episode. To test this hypothesis, we propose a novel econometric procedure, by introducing a Markov-Switching VAR model, and matching it with estimated asset shock episodes (à la Blanchard and Galí, 2009) and credit booms (Jordà, Schularick, and Taylor, 2013). Once we establish the relationship between the cycles and the financial and economic aggregates, we estimate impulse response functions to find that only during the phase synchronization the magnitude of the effect is strong with a clear sign across the whole time period and transmits to the sovereign credit market.
资产价格冲击和信用溢价会影响主权风险溢价吗?在2009年之前，发达国家的主权信用风险基本上不存在。我们发现了新的因素，表明主权风险溢价的一部分是外生决定的。我们捕捉到资产价格和信贷溢价之间的一种新的阶段同步，这种同步与公共债务成本的增加有关。我们首先表明，信贷溢价和资产价格冲击的金融和经济影响随着时间的推移而变化，尽管不同时期的冲击程度相似。为了解释这一变化，我们认为2008年的影响程度不同，因为金融周期( la Claessens, Kose, and Terrones, 2012)和信贷周期在前所未有的繁荣与萧条时期同步，这是“阶段同步”。为了验证这一假设，我们提出了一种新的计量经济学程序，通过引入马尔可夫切换VAR模型，并将其与估计的资产冲击事件( la Blanchard and Galí， 2009)和信贷繁荣(jordado, Schularick, and Taylor, 2013)相匹配。一旦我们建立了周期与金融和经济总量之间的关系，我们估计脉冲响应函数，发现只有在相位同步期间，影响的幅度才很强，在整个时间周期内都有明显的迹象，并传导到主权信贷市场。
{"title":"New Determinants of Sovereign Risk Premia: Identification through Asset Price Shocks, Credit Premia, and Financial Cycle Synchronization","authors":"Sabri Boubaker, D. K. Nguyen, Nikos Paltalidis","doi":"10.2139/ssrn.3815676","DOIUrl":"https://doi.org/10.2139/ssrn.3815676","url":null,"abstract":"Do asset price shocks and credit premia affect sovereign risk premia? Sovereign credit risk in developed countries was essentially non-existent prior to 2009. We find new factors suggesting that a part of sovereign risk premia is exogenously determined. We capture a novel phase synchronization among asset prices and credit premia that is associated with an increase in the cost of public debt. We start by showing that the financial and economic impact of credit premia, and asset price shocks have changed over time, even though the magnitude of the shocks is similar across different episodes. To explain this change, we suggest that the magnitude of the effect is different in 2008 because there is “phase synchronization” where financial cycles (à la Claessens, Kose, and Terrones, 2012) and credit cycles are synchronized in an unprecedented boom and bust episode. To test this hypothesis, we propose a novel econometric procedure, by introducing a Markov-Switching VAR model, and matching it with estimated asset shock episodes (à la Blanchard and Galí, 2009) and credit booms (Jordà, Schularick, and Taylor, 2013). Once we establish the relationship between the cycles and the financial and economic aggregates, we estimate impulse response functions to find that only during the phase synchronization the magnitude of the effect is strong with a clear sign across the whole time period and transmits to the sovereign credit market.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"107 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128603892","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It is widely agreed that the Nasdaq during the dot-com era 20 years ago was a full-fledged stock market bubble. Recently, the US stock market according to many metrics has become significantly more speculative and overvalued than it was at the dot-com peak 20 years ago. In both instances, a very broad subset of stocks became so highly valued that speculation in them had to be untethered from all fundamentals: the essence of what we call a “pure price-chasing bubble.” This paper, drawn from a book in progress, examines the history of stock markets for comparable pure price-chasing bubbles, finding nine or so which have ever reached such a speculative extreme, with an over-the-counter market in Kuwait in the early 1980s called the “Souk al-Manakh” representing the most extreme example. Based on my personal exposure to this Souk al-Manakh almost 40 years ago, I describe this anatomy and thereby make transparent the recurrent dynamics—on the way up and on the way down—of these greatest asset bubbles in human history. When one applies this framework to the current US stock market, one sees that the stock market in the US today will likely follow the disastrous path of the dot-com market.
{"title":"The Souk Al-Manakh: The Anatomy of a Pure Price-Chasing Bubble","authors":"F. Veneroso, M. Pasquali","doi":"10.2139/SSRN.3809955","DOIUrl":"https://doi.org/10.2139/SSRN.3809955","url":null,"abstract":"It is widely agreed that the Nasdaq during the dot-com era 20 years ago was a full-fledged stock market bubble. Recently, the US stock market according to many metrics has become significantly more speculative and overvalued than it was at the dot-com peak 20 years ago. In both instances, a very broad subset of stocks became so highly valued that speculation in them had to be untethered from all fundamentals: the essence of what we call a “pure price-chasing bubble.” \u0000 \u0000This paper, drawn from a book in progress, examines the history of stock markets for comparable pure price-chasing bubbles, finding nine or so which have ever reached such a speculative extreme, with an over-the-counter market in Kuwait in the early 1980s called the “Souk al-Manakh” representing the most extreme example. Based on my personal exposure to this Souk al-Manakh almost 40 years ago, I describe this anatomy and thereby make transparent the recurrent dynamics—on the way up and on the way down—of these greatest asset bubbles in human history. When one applies this framework to the current US stock market, one sees that the stock market in the US today will likely follow the disastrous path of the dot-com market.","PeriodicalId":284021,"journal":{"name":"International Political Economy: Investment & Finance eJournal","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122013697","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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