Spotting a Stock Market Bubble

Legal & General Investment Management's Emiel van den Heiligenberg says spotting a market bubble is easy - it is the timing that is so hard to get right

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This article is part of Morningstar's "Perspectives" series, written by third-party contributors.

The ‘Heiligenberg Index’ is a measure devised to help predict both asset and credit bubbles

The build-up of a stock market bubble is not too difficult to spot; starkly rising asset prices are usually a good starting point. Dramatically increasing debt ratios are a strong hint towards a credit bubble. The Bank for International Settlements has a great framework to spot credit bubbles, and using a similar framework we believe China still poses substantial credit risks at the moment.

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Legal & General Investment Management  is one of Europe’s largest institutional asset managers and a major global investor

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