IJSRP, Volume 5, Issue 3, March 2015 Edition [ISSN 2250-3153]
Devendran Indiran, Nurfadhlina Abdul Halim, Wan Muhamad Amir W. Ahmad
Rational speculative bubble can be defined as transient upward movements of stock prices above fundamental value due to speculative investors. The Generalised Johansen-Ledoit-Sornette (GJLS) model have been developed as a flexible tool to identify the size of rational speculative bubble. This model is combines the economic theory of rational expectation bubbles with finite-time singular crash hazard rates, behavioral finance on imitation and herding of investors and traders as well as mathematical statistical physics of bifurcations and phase transitions. It has been employed successfully to a large variety of stock bubbles in many different markets. The purpose of this study is to predict crash-time, intrinsic value and size of rational speculative bubble of Malaysian stock market during global economic crisis 2008. The predicted crash-time by employing GJLS model is exactly same as empirical date of crash during 2008.