Interesting look at bubbles and the impact of timing upon them.
Abstract:
Investment manias and financial bubbles have likely existed for as long as humans have been involved in financial markets. In this research piece we take a look at some of the more famous market bubbles in history and the extreme volatility and drawdowns they experienced. We then examine a simple trendfollowing approach investors could use to manage their risk. Across twelve market bubbles we find that a trendfollowing system would have improved return while reducing volatility. Most importantly, it would have reduced drawdowns significantly leading to the most important rule in all of investing – surviving to invest another day.
You can download the entire piece from here – Social Science Research Network
I noticed in the article that there were jail terms for for some of those, (including government ministers) instigating the pump and dump of the South Sea stock in the 1700’s. Pity we can’t seem to manage this level of decisive legal recourse today.
Tye