Two classes of speculative peaks

Speculation not only occurs in financial markets but also in numerous other markets, e.g. commodities, real estate, collectibles, and so on. Such spec ulative movements result in price peaks which share many common characteris tics: same order of magnitude of duration with respect to amplitude, same s hape (the so-called sharp-peak pattern). Such similarities suggest (at leas t as a first approximation) a common speculative behavior. However, a close r examination shows that in fact there are (at least) two distinct classes of speculative peaks. For the first, referred to as class U, (i) the amplit ude of the peak is negatively correlated with the price at the start of the peak (ii) the ensemble coefficient of variation exhibits a trough. Opposit e results are observed for the second class that we refer to as class S. On ce these empirical observations have been made we try to understand how the y should be interpreted. First, we show that the two properties are in fact related in the sense that the second is a consequence of the first. Second ly, by listing a number of cases belonging to each class we observe that th e markets in the S-class offer collection of items from which investors can select those they prefer. On the contrary, U-markets consist of undifferen tiated products for which a selection cannot be made in the same way. All p rices considered in the paper are real (i.e., deflated) prices. (C) 2001 El sevier Science B.V. All rights reserved.