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30.10.2020

When will the crash come?

Professor Rolf Daxhammer guest on the hr-iNFO-Podcast

By Katrin Reil

Are we currently in a speculation bubble? And when will the crash come? That was the topic at the start of the month on Hessischer Rundfunk’s hr-iNFO podcast. Professor Rolf Daxhammer, who has published a book on the subject together with co-author Máté Facsar, was a guest on the panel of experts. Among other things, he spoke about herd mentality, the painful effects of speculative bubbles and why human behaviour is not always driven by economy.

The stock markets are roaring, real estate prices climbing – even in the recent months of pandemic – yet at the same time there are trade conflicts and political uncertainty. How can it be that stock markets are at an all-time high in such a confusing situation? Is there a huge speculative bubble building up?

One Nobel laureate for economics has already warned of this phenomenon and its disastrous consequences. Other experts brush the matter off, pointing to the efficiency of the markets. Do such bubbles even exist, or do they only arise in people's imaginations?

hr-iNFO moderator Alexander Schmitt, himself a stock market professional, discussed these questions with a panel of experts and researchers, including Professor Rolf Daxhammer from the ESB Business School.

The divergence between price and value as well as rapid increases in value for reasons not fully understood - all these are the typical characteristics of speculation bubbles, Daxhammer explained in the podcast.

Professor Daxhammer, a specialist in investor behavior, says that despite the clear signals, it comes as no surprise that speculative bubbles keep appearing. “In situations that are complex – and who would deny that this applies to financial markets? – we tend to orient ourselves on what others do. Herd behavior is not irrational, it is part of our evolutionary makeup. If you take a behavioural science perspective, you can see that the behavior of those in the market does not always line up with the notion of ‘homo oeconomicus,’ a creature that processes information quickly, precisely and without error.”

You can listen to the hr-iNFO-Podcast “Wann kommt der Crash? – Die Angst vor Spekulationsblasen nimmt zu” online here.

Rolf J. Daxhammer, Máté Facsar (2017): Spekulationsblasen. Den Turbulenzen am Finanzmarkt auf der Spur, UVK Verlagsgesellschaft mbH. ISBN 978-3-86764-746-5