Abstract
This dissertation explores episodes of intraday stock price bubbles in small- and micro-cap stocks, a type of price bubble that is understudied in traditional financial literature. Stock price bubbles, marked by significant deviations of market prices from fundamental value, often cause undue harm to market participants and hinder the efficient allocation of capital. Despite their long history and recurring nature, the anatomy of price bubbles is still highly debated--their existence, causes, and impacts. Drawing on market efficiency, microstructure, and behavioral finance theories, the research applies a number of traditional and more recently developed statistical tests to detect intraday bubbles and explores factors influencing the size of these events. Utilizing a two-paper dissertation format, the study analyzes 342 bubble events occurring in Russell Microcap Index constituent stocks between 2018 and 2022. This period, marked by significant market events such as COVID-19 and the meme stock trading frenzy, provides a unique and dynamic context for exploring these phenomena. The first empirical paper utilizes minute-by-minute trade data to test for the presence of bubble dynamics through trends, patterns, exuberance, and nonstationary segments of the price series. The second empirical paper employs regression analysis to assess the relationship between multiple predictor variables and the magnitude of the intraday bubble while controlling for company fundamentals, news, market returns, volatility, and industry. Findings suggest that the complex nature of intraday trading generates price bubbles in our sample of small- and micro-cap stocks. This research not only underscores the need for more sophisticated bubble detection methods that account for time-scale dependencies but also provides actionable insights for market participants and regulators to better monitor and mitigate the risks associated with intraday bubbles.
Library of Congress Subject Headings
Economics—Psychological aspects; Small capitalization stocks; Stocks—Prices
Date of Award
2024
School Affiliation
Graziadio Business School
Department/Program
Business
Degree Type
Dissertation
Degree Name
Doctorate
Faculty Advisor
Levan Efremidze
Recommended Citation
Sawyer, Benjamin, "Intraday price bubbles and their influencing factors: a small- and micro-cap analysis" (2024). Theses and Dissertations. 1551.
https://digitalcommons.pepperdine.edu/etd/1551