Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212968
Authors: 
Taipalus, Katja
Year of Publication: 
2006
Series/Report no.: 
Bank of Finland Studies E:35
Abstract: 
Tests for unit roots in log dividend yields, which are consistent with `rational bubbles' in stock prices, are conducted for the S&P500 and Finnish stock market indexes.In addition to the traditional unit root tests, we split the data into 10-year segments and use frequency domain analysis to test for the presence of unit roots in the dividend yield data.The results strongly suggest the existence of bubbles in both the US and Finnish markets.Finally we develop a novel dividend yield-based method to track periods when stock prices divert their fundamental levels. This indicator produces promising results, as it seems to have some forecasting ability concerning booms and busts in the stock markets.
Subjects: 
equity price
bubble
rolling ADF
JEL: 
P50
Persistent Identifier of the first edition: 
ISBN: 
952-462-307-2
Document Type: 
Book

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