Speculative Bubble Periods of Malaysian Stock Market-1997

Abstract

Rational speculative bubble can be defined as transient upward movements of prices above intrinsic value. This study focused on rational speculative bubble period of Malaysian stock market during year 1997. The intrinsic value predicted by using the selected time interval is 1154.71 which shows that the market value is deviated about 10.12% from its fundamental value. This deviation is called as size of the speculative rational bubble that formed during financial crisis 1997. By using the predicted intrinsic value, we found that the rational speculative bubble start to form and grow in Malaysian stock market from 25/03/1996 to 28/03/1997. There are seven bubble phases found in the period of selected time interval. It is essential needs for researcher to study on financial bubbles. It is because the economic bubbles are one of the serious issue that give negative implications to the development of economy which is the factor leads to an economy crisis