The Leir Center For Financial Bubble Research within the New Jersey Institute Of Technology’s School Of Management was established through the generous support of the Ridgefield and Leir Foundations.
The Center seeks to understand through quantitative and qualitative research how a financial bubble can be identified including its stages of development and what policies can best manage its impacts.
The Center believes bubble related research past and present has been primarily focused on the most recent financial crisis, which often involves a financial bubble but frequently does not. Yet every crisis seems now to be called a bubble. Thus developing a much more precise understanding of what is a bubble and what is not represents an important area of research. Further the focus on the most recent crisis usually involves assessing its particular causes with the idea of developing legislation and regulations to prevent a future bubble [1907 – Federal Reserve; 1929 – SEC; 1987 – FIRREA; 1999 – Sarbanes/Oxley; 2008 – Dodd/Frank]. Yet bubbles seem to arise despite these efforts. In addition it is apparent there are different types of bubbles that the existing literature has identified but not analyzed in detail as to their similar or different characteristics or economic impacts.
Examples of different sources of bubbles are Regulatory Liberalization [Japanese 1980s, Mexican 1995 and recent US subprime]; New Disruptive Technologies [Railroads 19th Century or Internet 20th]; Financial Innovation [Leveraged Buyouts and Junk Bonds 1980s or SIVs and Credit Default Swaps 2008]; Real Estate Bubbles [Japan 1980s and US 2003-2008]; Stock Market Bubbles [1929, 1960s, 1980s, Internet, 2003-2007], Tax Law Changes [1960s Conglomerates and 2003-2007 Hedge Funds], and Accounting Changes [Conglomerates].
Behavioral characteristics during a bubble and its aftermath such as over-optimism or pessimism regarding policy, investments or contracts are also areas of inquiry.
Importantly the Center’s objective is to take an approach to bubble research that focuses on analyzing bubbles in ways meant to be useful to practitioners. The Center’s sponsored research is posted on this website for download as working papers become available.