Are There Rational Bubbles in the US Stock Market? Overview and a New Test

A. (Tassos) G. Malliaris; Ramaprasad Bhar

Are There Rational Bubbles in the US Stock Market? Overview and a New Test

A. (Tassos) G. Malliaris, Ramaprasad Bhar

The University of New South Wales

Research output: Chapter in Book/Report/Conference proceeding › Chapter

Abstract

A speculative bubble is usually defined as the difference between the market value of a security and its fundamental value. Although there are several important theoretical issues surrounding the topic of asset bubbles, the existence of bubbles is inherently an empirical issue that has not been settled yet. This paper reviews several important tests and offers one more methodology that improves upon the existing ones. The new test is applied to the annual US stock market data spanning over a century and at the monthly frequency covering the post-war period. Although we find evidence of stock price bubble in both cases, the post-war period exhibit only positive component whereas the annual data exhibit some episode of negative bubble.

Original language	American English
Title of host publication	Asset Price Bubbles: Implications For Monetary And Regulatory Policy
State	Published - Jan 1 2001

Keywords

Stock Market
Asset Bubbles
Testing for Market Overvaluation
Fundamental Valuation

Disciplines

Business
Economics

Access to Document

Are There Rational Bubbles in the US Stock Market Overview and aFinal published version, 290 KBLicense: Unspecified

Cite this

@inbook{ea446a1433d849d8bb88f8150b7e9b33,

title = "Are There Rational Bubbles in the US Stock Market? Overview and a New Test",

abstract = " A speculative bubble is usually defined as the difference between the market value of a security and its fundamental value. Although there are several important theoretical issues surrounding the topic of asset bubbles, the existence of bubbles is inherently an empirical issue that has not been settled yet. This paper reviews several important tests and offers one more methodology that improves upon the existing ones. The new test is applied to the annual US stock market data spanning over a century and at the monthly frequency covering the post-war period. Although we find evidence of stock price bubble in both cases, the post-war period exhibit only positive component whereas the annual data exhibit some episode of negative bubble.",

keywords = "Stock Market, Asset Bubbles, Testing for Market Overvaluation, Fundamental Valuation",

author = "Malliaris, {A. (Tassos) G.} and Ramaprasad Bhar",

note = "Bhar, Ramaprasad and Malliaris, A. (Tassos) G., Are There Rational Bubbles in the US Stock Market? Overview and a New Test. ASSET PRICE BUBBLES: IMPLICATIONS FOR MONETARY AND REGULATORY POLICY, ELSEVIER SCIENCE, George Kaufman, ed., pp. 125-144, Elsevier Science, 2001. Available at SSRN: https://ssrn.com/abstract=1084582",

year = "2001",

month = jan,

day = "1",

language = "American English",

booktitle = "Asset Price Bubbles: Implications For Monetary And Regulatory Policy",

}

TY - CHAP

T1 - Are There Rational Bubbles in the US Stock Market? Overview and a New Test

AU - Malliaris, A. (Tassos) G.

AU - Bhar, Ramaprasad

N1 - Bhar, Ramaprasad and Malliaris, A. (Tassos) G., Are There Rational Bubbles in the US Stock Market? Overview and a New Test. ASSET PRICE BUBBLES: IMPLICATIONS FOR MONETARY AND REGULATORY POLICY, ELSEVIER SCIENCE, George Kaufman, ed., pp. 125-144, Elsevier Science, 2001. Available at SSRN: https://ssrn.com/abstract=1084582

PY - 2001/1/1

Y1 - 2001/1/1

N2 - A speculative bubble is usually defined as the difference between the market value of a security and its fundamental value. Although there are several important theoretical issues surrounding the topic of asset bubbles, the existence of bubbles is inherently an empirical issue that has not been settled yet. This paper reviews several important tests and offers one more methodology that improves upon the existing ones. The new test is applied to the annual US stock market data spanning over a century and at the monthly frequency covering the post-war period. Although we find evidence of stock price bubble in both cases, the post-war period exhibit only positive component whereas the annual data exhibit some episode of negative bubble.

AB - A speculative bubble is usually defined as the difference between the market value of a security and its fundamental value. Although there are several important theoretical issues surrounding the topic of asset bubbles, the existence of bubbles is inherently an empirical issue that has not been settled yet. This paper reviews several important tests and offers one more methodology that improves upon the existing ones. The new test is applied to the annual US stock market data spanning over a century and at the monthly frequency covering the post-war period. Although we find evidence of stock price bubble in both cases, the post-war period exhibit only positive component whereas the annual data exhibit some episode of negative bubble.

KW - Stock Market

KW - Asset Bubbles

KW - Testing for Market Overvaluation

KW - Fundamental Valuation

UR - https://ecommons.luc.edu/business_facpubs/184

M3 - Chapter

BT - Asset Price Bubbles: Implications For Monetary And Regulatory Policy

ER -

Are There Rational Bubbles in the US Stock Market? Overview and a New Test

Abstract

Keywords

Disciplines

Access to Document

Other files and links

Cite this