Behavioral finance and speculative bubbles: A test application to data from the Casablanca Stock Exchange

Abstract

The objective of this article is to try to identify the existence of a possible speculative bubble component in the evolution of the prices of shares listed on the Casablanca Stock Exchange. Generally characterized by disproportionate and persistent deviations of the prices of assets from their fundamental values, speculative bubbles are not necessarily irrational, because the principle of financial rationality provides that the price of financial assets depends largely on expectations of future prices, which generates possibilities of multiple equilibria.

The application of empirical tests to data from the Casablanca Stock Exchange (BVC), in this case to the chronological series of 5777 tradings sessions, and which are based on an autoregressive model, and on the statistical and descriptive analysis of the series, confirm the existence of a component of a rational speculative bubble of monetary origin which is characterized by a return to equilibrium in the short and medium terms.

We conclude that the depth and level of development of financial products on the Moroccan financial market contribute to the relative control of risk.

Keywords: speculative bubbles, behavioral finance, conventional finance, BVC

JEL classification: G0,G1

Paper Type : Empirical Research