Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40257
Authors: 
Bohl, Martin T.
Siklos, Pierre L.
Year of Publication: 
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

Files in This Item:
File
Size
123.16 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.