Importance The Russian stock market is inefficient as to adequate disclosure of available information. Therefore, is is prone to overreaction (price volatility) to different external and internal stress factors, leading to creation of 'price bubbles'. It is important to develop and improve an algorithm for the stock market assessment for timely identification of and warning about upcoming critical events. Objectives The aim is to develop a complex methodology to analyze the Russian stock market with a view to identify 'price bubbles'. Methods The study rests on methods of scientific investigation (analysis, synthesis), statistical analysis, mathematical modeling and econometric analysis. Results We worked out and underpinned an algorithm to analyze the Russian stock market, which consists of three stages and can successfully be applied to identify 'price bubbles'. The paper describes the specifics of movements of the market index (MICEX), on the basis of which we developed our unique theoretical model of the 'price bubble' in the Russian stock market. Conclusions and Relevance The Russian stock market stands on the verge of another 'financial bubble'. We expect this event in late 2015 – early 2016. We also assume that closer to the end of Q1 or beginning of Q2 2016 the bubble will possibly blow-off and lead to a significant correction in the Russian stock market, which will be equal to that we observed in 2008–2009.
Demidenko T.I. Povedencheskoe napravlenie finansovoi nauki: obzor povedencheskikh faktorov, vliyayushchikh na rynochnuyu kapitalizatsiyu rossiiskikh kompanii [Behavioral direction of financial science: a review of behavioral factors influencing the market capitalization of Russian companies]. Zhurnal ekonomicheskoi teorii = Russian Journal of Economic Theory, 2010, no. 2, pp. 284–289.
Sornette D. Kak predskazyvat' krakhi finansovykh rynkov [Why Stock Markets Crash: Critical Events in Complex Financial Systems]. Moscow, Internet-treiding Publ., 2003, 391 p.
Sidorovich V.A. Spekulyativnyi kapital kak faktor krizisa [Speculative capital as a factor of crisis]. Ekonomist = Economist, 2009, no. 2, pp. 43–52.
Blanchard O.J., Watson M.W. Bubbles, Rational Expectations and Financial Markets. NBER Working Paper, 1982, no. 945, pp. 1–28. Available at: Link.
Chirkova E.V. Anatomiya finansovogo puzyrya [The anatomy of a financial bubble]. Ekonomicheskaya politika = Economic Policy, 2010, no. 1, pp. 81–97.
Mel'nikova E.G. Formirovanie tsenovykh “puzyrei” na rynke aktsii [Formation of 'price bubbles' in the stock market]. Den'gi i kredit = Money and Credit, 2010, no. 12, pp. 43–48.
Fama E.F. Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 1970, vol. 25, iss. 2, pp. 383–417. Available at: Link.
Detken C., Smets F. Asset Price Booms and Monetary Policy. European Central Bank Working Paper, 2004, no. 234, pp. 1–62. Available at: Link.
White E. Bubbles and Busts: The 1990s in the Mirror of the 1920s. NBER Working Paper, 2006, no. 12138. Available at: Link.
Tirole J. On the possibility of speculation under rational expectations. Econometrica, 1982, vol. 50, no. 5, pp. 1163–1181. Available at: Link.
Hirota S., Sunder S. Price Bubbles sans Dividend Anchors: Evidence from laboratory stock markets. Journal of Economic Dynamics and Control, 2007, vol. 31, pp. 1875–1909. Available at: Link.
Chirkova E.V. Ispol'zovanie rynochnykh mul'tiplikatorov dlya diagnostirovaniya nalichiya finansovogo puzyrya na fondovom rynke [The use of market multipliers to diagnose the presence of a financial bubble in the stock market]. Vestnik Finansovogo universiteta = Bulletin of Financial University, 2011, no. 2, pp. 37–44.
Shiller R.J. Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends? The American Economic Review, 1981, vol. 71, iss. 3, pp. 421–436. Available at: Link.
West K.D. A Specification Test for Speculative Bubbles. The Quarterly Journal of Economics, 1987, vol. CII, no. 3, pp. 553–580. Available at: Link.
Diba B.T., Grossman H.I. The Theory of Rational Bubbles in Stock Prices. The Economic Journal, 1988, vol. 98, no. 392, pp. 746–754. Available at: Link.
Ishkhanov A.V. Matematicheskoe modelirovanie krizisov [Mathematical modeling of crises]. Ekonomika: teoriya i praktika = Economy: Theory and Practice, 2011, no. 3, pp. 16–20.
Malyugin V.I. Rynok tsennykh bumag. Kolichestvennye metody analiza [Securities market. Quantitative methods of analysis]. Moscow, Delo Publ., 2013, 322 p.
Tvardovskii V. Model' spravedlivoi kapitalizatsii, "puzyr'" fondovogo rynka i prognoz stoimosti rossiiskikh aktsii [A model of fair capitalization, a 'bubble' of the stock market and forecast of Russian stocks value]. Rynok tsennykh bumag = Securities Market, 2004, no. 11.
Teplov S.E. Primenenie R/S-analiza na fondovykh rynkakh [Applying the R/S analysis on stock markets]. Finansy i biznes = Finance and Business, 2008, no. 1, pp. 129–137.
Kirichenko L.O. Sravnitel'nyi analiz statisticheskikh svoistv otsenok pokazatelya Khersta [A comparative analysis of statistical properties of the Hurst exponent]. Vestnik Natsional'nogo tekhnicheskogo universiteta Khar'kovskii politekhnicheskii institut. Seriya: Informatika i modelirovanie = Bulletin of National Technical University Kharkiv Polytechnic Institute. Series: Informatics and Modeling, 2010, no. 21, pp. 88–95.
Kalush Yu.A., Loginov V.M. Pokazatel' khersta i ego skrytye svoistva [The Hurst exponent and its hidden properties]. Sibirskii zhurnal industrial'noi matematiki = Siberian Journal of Industrial Mathematics, 2002, no. 4, pp. 29–37.
Dubovikov M.M. Pervyi kongress po ekonofizike v Rossii [The first congress on econophysics in Russia]. Zhurnal novoi ekonomicheskoi assotsiatsii = Journal of New Economic Association, 2009, no. 3-4, pp. 260–265.
