TY  - JOUR
AU  - Barbarino,Alessandro
AU  - Jovanovic,Boyan
TI  - Shakeouts and Market Crashes
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10556
PY  - 2004
Y2  - June 2004
UR  - http://www.nber.org/papers/w10556
L1  - http://www.nber.org/papers/w10556.pdf
N1  - Author contact info:
Alessandro Barbarino
Federal Reserve Board
E-Mail: alessandro.barbarino@frb.gov

Boyan Jovanovic
New York University
Department of Economics
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8953
Fax: 212/995-4186
E-Mail: Boyan.Jovanovic@nyu.edu
AB  - Stock-market crashes tend to follow run-ups in prices. These episodes look like bubbles that gradually inflate and then suddenly burst. We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain. Two conditions are sufficient for this to happen: A declining hazard rate in the prior distribution over market size and a positively sloped supply of capital to the industry. For the period 1971-2001 we fit the model to the Telecom sector.
ER  -