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Rational Bubbles in the Korea Stock Market? Further Evidence based on Nonlinear and Nonparametric Cointegration Tests

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Author Info
Wen-Chi Liu () (Department of Business Administration, Da-Yeh University, Chang-Hua, Taiwan)
Tsangyao Chang () (Department of Finance, Feng Chia University, Taichung, Taiwan)
Abstract

In this study, we revisit the issue as to the presence of Rational Bubbles in the Korea stock market during the May 1996 to November 2007 period using three cointegration tests, namely JJ (Johansen and Juselius, 1990), KSS (Kapetanois et al., 2006) and BN (Bierens, 1997, 2004) approaches. The results from the conventional JJ test support the existence of rational bubbles, whereas those from both nonlinear test of KSS and nonparametric test of BN attest to the absence of rational bubbles in the Korea stock market.

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File URL: http://economicsbulletin.vanderbilt.edu/2008/volume3/EB-08C30021A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 3 (2008)
Issue (Month): 34 ()
Pages: 1-12
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Handle: RePEc:ebl:ecbull:v:3:y:2008:i:34:p:1-12

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Related research
Keywords: Rational Bubbles; Korea Stock Market; Nonlinear and Nonparametric Cointegration Tests;

Find related papers by JEL classification:
C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
G1 - Financial Economics - - General Financial Markets

References listed on IDEAS
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  1. Abhyankar, A & Copeland, L S & Wong, W, 1997. "Uncovering Nonlinear Structure in Real-Time Stock-Market Indexes: The S&P 500, the DAX, the Nikkei 225, and the FTSE-100," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 1-14, January.
  2. Crowder, William J & Wohar, Mark E, 1998. "Stock Price Effects of Permanent and Transitory Shocks," Economic Inquiry, Oxford University Press, vol. 36(4), pages 540-52, October.
  3. Cunado, J. & Gil-Alana, L.A. & de Gracia, F. Perez, 2005. "A test for rational bubbles in the NASDAQ stock index: A fractionally integrated approach," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2633-2654, October. [Downloadable!] (restricted)
  4. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation, Yale University. [Downloadable!]
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  5. Bohl, Martin T., 2003. "Periodically collapsing bubbles in the US stock market?," International Review of Economics & Finance, Elsevier, vol. 12(3), pages 385-397. [Downloadable!] (restricted)
  6. Bierens, Herman J., 1997. "Nonparametric cointegration analysis," Journal of Econometrics, Elsevier, vol. 77(2), pages 379-404, April. [Downloadable!] (restricted)
    Other versions:
  7. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2006. "Testing For Cointegration In Nonlinear Smooth Transition Error Correction Models," Econometric Theory, Cambridge University Press, vol. 22(02), pages 279-303, April. [Downloadable!]
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