Financial asset pricing using price bubble risk

“Bubble,” when used in financial markets, refers to higher public expectations of rising prices in the future that leads to a temporary increase in prices. One of the most important risks affecting stock returns is the risk of bubbling stock prices. This study aimed to investigate the effect of pricing bubble formation risk on the stock return. A five-factor pricing model was used for the data gathered from 274 companies within six months for monthly portfolios during the eight years including the period of 2010-2017. Stock returns were used to measure asset pricing. The research is applied and correlated in terms of objective and post-event research in terms of collecting the research data. Panel data model estimation showed that price bubble factor and size factor had a negative and significant relationship with stock return rate and momentum market factor, value factor with stock return rate had a positive and significant relationship. Based on the research findings, it can be said that shareholders can use the price bubble factor to predict the rate of return on stocks and determine the price and value of their stocks and assets.