Fads and the Crash of '87

Mustafa Chowdhury; Ji-chai Lin

doi:10.1111/j.1540-6288.1993.tb01354.x

Fads and the Crash of '87

Mustafa Chowdhury, Ji-chai Lin

Research output: Journal article publication › Journal article › Academic research › peer-review

6 Citations (Scopus)

Abstract

This paper examines changes in return‐generating processes before and after the crash of '87. We find that the process for daily returns of size‐sorted portfolios changed from an ARMA(1, 2) in the pre‐crash period to a MA(1) in the post‐crash period. The change is explained by a “fads” model similar to that proposed by Poterba and Summers [17]. The analysis suggests that the crash may have been related to speculative fads that prevailed prior to the crash. The fads component in stock prices then disappeared after the crash. Other possible explanations are also discussed.

Original language	English
Pages (from-to)	385-401
Number of pages	17
Journal	Financial Review
Volume	28
Issue number	3
DOIs	https://doi.org/10.1111/j.1540-6288.1993.tb01354.x
Publication status	Published - 1 Jan 1993
Externally published	Yes

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1111/j.1540-6288.1993.tb01354.x

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Fads and the Crash of '87

Abstract

ASJC Scopus subject areas

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