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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
|Document Type:||Working Paper|
|Appears in Collections:||Research Notes, Deutsche Bank Research|
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