Harvard Academics Reveal Blueprint for Avoiding Stock Crashes
- Rising volatility, share issuance tend to be the warning signs
- Future returns after big runups are OK, but crashes do happen
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Good news for everyone waiting for a bubble to burst. Predicting sectorwide crashes in the equity market isn’t impossible.
That’s the conclusion of Harvard University researchers who studied boom-and-bust cycles in publicly traded U.S. industries since 1926. In a new paper, Robin Greenwood, Andrei Shleifer and Yang You found that while not every violent advance in shares ends in horror, those that do share common traits. Among them: rising volatility and greater share issuance.