"The increase in volatility is extremely common at market tops and a warning bell is in play after the parabolic type moves at the end of the market cycle." The academic evidence tends to disagree. In their April 2017 paper entitled “Can We Use Volatility to Diagnose Financial Bubbles? Lessons from 40 Historical Bubbles”, Didier Sornette, Peter Cauwels and Georgi Smilyanov examine price volatility before, during, and after financial asset bubbles in order to uncover possible commonalities and check empirically whether volatility might be used as an indicator or an early warning signal of an unsustainable price increase and the associated crash. Somewhat contrary to previous academic and practitioner claims, the main finding of this paper is that there is no systematic evidence of increasing volatility as a diagnostic or an early warning signal that a bubble is present and or developing. Sometimes volatility does tend to increase, other times it decreases before a fall, and most of the time volatility barely changes as the bubble develops towards its end.

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