The Mechanism and Characterization of Asset Price Cycles: Literature Review and Prospect

Abstract

Abstract:

A stylized fact in financial market is that asset price booms are often followed by dramatic or long lasting falls. Understanding and quantifying the cyclical behavior of asset prices has always been a hot topic in the academic circle. This paper reviews the development of traditional asset pricing theory and empirical studies, and points out their weakness in explaining long-term market cycles. Based on the view of 'fundamental-information diffusion-asset price', we study the contribution of information diffusion theory to the asset pricing theory and the recent development of related literature. Finally, we discuss potential work that needs to be carried out in the future, especially the possible academic innovation in the interdisciplinary field of information diffusion-based asset pricing method and management science, and their potential application in the financial industry and market regulation.

Key words: asset pricing, cycle, risk-return, information diffusion

Li Ziran, Zu Lei, Wang Shouyang. The Mechanism and Characterization of Asset Price Cycles: Literature Review and Prospect[J]. , 2015, 27(7): 15-22.

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