According to Mizuno et al, the worst inflation in recent history occurred in Hungary after World War II. The exchange rate for the Hungarian Pengo to the US dollar rose from 100 in July 1945 to 6 x 1024 Pengos per dollar by July 1946. Hyperinflations are triggered by inflationary expectations. Past increases in prices … Continue reading Hyperinflation and Asset Bubbles
It seems only yesterday when “rational expectations” ruled serious discussions of financial economics. Value was determined by the CAPM – capital asset pricing model. Markets reflected the operation of rational agents who bought or sold assets, based largely on fundamentals. Although imprudent, stupid investors were acknowledged to exist, it was impossible for a market in … Continue reading Asset Bubbles
I buy into the “hedgehog/fox” story, when it comes to forecasting. So you have to be dedicated to the numbers, but still cast a wide net. Here are some fun stories, relevant facts, positive developments, and concerns – first Links post for 2015. Cool Facts and Projections How the world’s population has changed – we … Continue reading Links – February 2015
I’ve been going over past posts, projecting forward my coming topics. I thought I would share some of the best and some of the topics I want to develop. Recommendations From Early in 2014 I would recommend Forecasting in Data-Limited Situations – A New Day. There, I illustrate the power of bagging to “bring up” … Continue reading 2014 in Review – I
Because the Great Recession of 2008-2009 was closely tied with asset bubbles in the US and other housing markets, I have a category for asset bubbles in this blog. In researching the housing and other asset bubbles, I have been surprised to discover that there are economists who deny their existence. By one definition, an … Continue reading Forecasting the Downswing in Markets – II
Financial and asset bubbles are controversial, amazingly enough, in standard economics, where a bubble is defined as a divergence in a market from fundamental value. The problem, of course, is what is fundamental value. Maybe investors in the dot.com frenzy of the late 1990’s believed all the hype about never-ending and accelerating growth in IT, … Continue reading Daily Updates on Whether Key Financial Series Are Going Into Bubble Mode
Professor Didier Sornette, who holds the Chair in Entreprenuerial Risks at ETH Zurich, is an important thinker, and it is heartening to learn the American Association for the Advancement of Science (AAAS) is electing Professor Sornette a Fellow. It is impossible to look at, say, the historical performance of the S&P 500 over the past … Continue reading Didier Sornette – Celebrity Bubble Forecaster
Note: This is good post from the old series, and I am re-publishing it with the new citation to Taleb’s book in progress Hidden Risk and a new video. ———————————————– One of the biggest questions is whether financial crises can be predicted in any real sense. This is a major concern of mine. I was … Continue reading Predicting Financial Crisis – the Interesting Case of Nassim Taleb
Let’s ask what might seem to be a silly question, but which turns out to be challenging. What is an asset bubble? How can asset bubbles be identified quantitatively? Let me highlight two definitions – major in terms of the economics and analytical literature. And remember when working through “definitions” that the last major asset … Continue reading What is a Market Bubble?
We’ve been struggling with a software glitch in WordPress, due to, we think, incompatibilities between plug-in’s and a new version of the blogging software. It’s been pretty intense. The site has been fully up, but there was no possibility of new posts, not even a notice to readers about what was happening. All this started just … Continue reading Changes to Businessforecastblog in 2014 – Where We Have Been, Where We Are Going
