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Explosive behavior in historic NASDAQ market prices

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  • Demmler, Michael
  • Fernández, Amilcar Orlian

Abstract

Within recent years the technology market represented by the NASDAQ Composite Index showed astonishing price increases, especially during the COVID-19 pandemic. As extreme market price movements are nothing new to the technology sector, one can question the vulnerability of the market to frequent explosive behaviors in the form of asset price bubbles or financial crisis. Hence, the present paper aims to statistically analyze historic long-term price data of the NASDAQ Composite Index including the recent 2020–21 rally in order to identify and date stamp potentially recurrent tendencies of explosive market price behaviors. The quantitative research design uses daily market prices from the period 1992 to 2021 and is based on the Generalized Supremum Augmented Dickey-Fuller test of explosiveness and three different methods of date stamping. Main results reveal several short-term moments of price explosiveness during three major episodes (second half of 1995 until beginning of 1996, Dotcom Bubble and Subprime Crisis). Furthermore, there is no evidence of significant explosive behavior during the COVID-19 pandemic, i.e., a recent technology bubble.

Suggested Citation

  • Demmler, Michael & Fernández, Amilcar Orlian, 2024. "Explosive behavior in historic NASDAQ market prices," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:ecofin:v:71:y:2024:i:c:s1062940824000196
    DOI: 10.1016/j.najef.2024.102095
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    More about this item

    Keywords

    Price explosiveness; Technology market; Asset price bubble; Financial crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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