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http://hdl.handle.net/10419/40257
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| Title: | | Dectecting speculative bubbles in stock prices: A new approach and some evidence for the US  |
| Authors: | | Bohl, Martin T. Siklos, Pierre L. |
| Issue Date: | | 2001 |
| Series/Report no.: | | Research notes in economics & statistics 01-3 |
| Abstract: | | A large part of the current debate on US stock price behavior concentrates on the question of whether stock prices are driven by fundamentals or by non-fundamental factors. In this paper we put forward the hypothesis that a present value model with time-varying expected returns provides an empirically valid description of US stock price behavior in the long-run, while short-run deviations of actual share prices from present value prices are driven by nonfundamental factors like speculative bubbles and/or noise trading behavior. Our empirical findings for the US stock market covering the 1871:1 - 2000:12 period provide strong and robust support for the hypothesis that in the short-run US stock prices exhibit nonfundamental run-ups followed by crashes, while in the long-run US share prices adhere to fundamentals. |
| Subjects: | | Present Value Model US Stock Prices Asymmetric Adjustment Cointegration |
| JEL: | | G12 E44 C32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Research Notes, Deutsche Bank Research
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