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<p>This paper examines the dynamics of financial bubbles and their potential transmission mechanisms across different segments of the US financial system from 1980 to 2019. Asset price bubbles, often driven by credit booms, pose a significant threat to financial stability, making it essential to understand how bubble-like behavior spreads across different market segments. Our analysis reveals that the residential property market and credit segments are particularly susceptible to bubbles, especially during periods leading up to major financial disruptions, such as the Great Recession. We demonstrate that bubbles originating in the residential property market can spread to all the other market segments. Importantly, we identify the credit channel, especially the role of collateral, as a critical pathway for the transmission of housing bubbles to the stock market. Our research offers some insights into the mechanisms driving bubble contagion, which are essential for policymakers, investors, and regulators to navigate and mitigate systemic risks in the financial system.</p>

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Dissecting Bubble Detection and Contagion: A Segmented Analysis of the Real Estate, Credit, and Stock Markets

  • 期刊论文

  • 发表日期：

    2025年12月9日

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  • Daniel V. Santos,
  • Manuel Duarte Rocha,
  • Sujiao Emma Zhao

摘要

This paper examines the dynamics of financial bubbles and their potential transmission mechanisms across different segments of the US financial system from 1980 to 2019. Asset price bubbles, often driven by credit booms, pose a significant threat to financial stability, making it essential to understand how bubble-like behavior spreads across different market segments. Our analysis reveals that the residential property market and credit segments are particularly susceptible to bubbles, especially during periods leading up to major financial disruptions, such as the Great Recession. We demonstrate that bubbles originating in the residential property market can spread to all the other market segments. Importantly, we identify the credit channel, especially the role of collateral, as a critical pathway for the transmission of housing bubbles to the stock market. Our research offers some insights into the mechanisms driving bubble contagion, which are essential for policymakers, investors, and regulators to navigate and mitigate systemic risks in the financial system.