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Unit root testing for bubbles: A resurrection?

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Author Info

  • Waters, George A.

Abstract

Evans [Evans, G., Pitfalls in testing for explosive bubbles in asset prices. The American Economic Review 1991;81;922-930] and Charemza and Deadman [Charemza, W., Deadman, D., Speculative bubbles with stochastic explosive roots: The failure of unit root testing. Journal of Empirical Finance 1991;2;153-163] present models of bubbles that are not detectable by unit root tests. This paper shows that for a more natural log specification of the tests, bubbles generated by the latter model are detectable.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 101 (2008)
Issue (Month): 3 (December)
Pages: 279-281

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Handle: RePEc:eee:ecolet:v:101:y:2008:i:3:p:279-281

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Periodically collapsing bubbles Stochastic explosive root processes;

References

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  1. Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-30, June.
  2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  3. Charemza, Wojciech W. & Deadman, Derek F., 1995. "Speculative bubbles with stochastic explosive roots: The failure of unit root testing," Journal of Empirical Finance, Elsevier, vol. 2(2), pages 153-163, June.
  4. Bhargava, Alok, 1986. "On the Theory of Testing for Unit Roots in Observed Time Series," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 369-84, July.
  5. Parke, William R. & Waters, George A., 2007. "An evolutionary game theory explanation of ARCH effects," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2234-2262, July.
  6. George A. Waters & James E. Payne, 2007. "REIT markets and rational speculative bubbles: an empirical investigation," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 747-753.
  7. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
  8. James Payne & George Waters, 2007. "Have Equity REITs Experienced Periodically Collapsing Bubbles?," The Journal of Real Estate Finance and Economics, Springer, vol. 34(2), pages 207-224, February.
  9. Taylor, Mark P. & Peel, David A., 1998. "Periodically collapsing stock price bubbles: a robust test," Economics Letters, Elsevier, vol. 61(2), pages 221-228, November.
  10. Bohl, Martin T., 2003. "Periodically collapsing bubbles in the US stock market?," International Review of Economics & Finance, Elsevier, vol. 12(3), pages 385-397.
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Citations

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Cited by:
  1. Deev, Oleg & Kajurova, Veronika & Stavarek, Daniel, 2013. "Testing rational speculative bubbles in Central European stock markets," MPRA Paper 46582, University Library of Munich, Germany.
  2. Catherine Araujo Bonjean & Catherine Simonet, 2012. "Are grain markets in Niger driven by speculation?," Working Papers halshs-00626409, HAL.
  3. Jahan-Parvar, Mohammad & Waters, George, 2009. "Equity Price Bubbles in the Middle Eastern and North African Financial Markets," MPRA Paper 17859, University Library of Munich, Germany.

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