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Detecting periodically collapsing bubbles in the S&P 500

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  • Nguyen, Quynh Nhu
  • Waters, George A.

Abstract

Two robust tests on S&P 500 data show evidence of bubbles. A test of stationarity controlling for skewness and excess kurtosis is designed to detect periodically collapsing rational bubbles. Test for cointegration and direct tests on the price-dividend and price-earnings ratios cannot reject non-stationarity for all the samples considered. A test for explosive behavior on rolling window of the data also provide evidence of multiple bubbles and allow for dating of bubbles using the same set of variables. The two bubble episodes detected in all relevant cases are associated with the Spanish Flu in 1917 and the housing crisis in 2008.

Suggested Citation

  • Nguyen, Quynh Nhu & Waters, George A., 2022. "Detecting periodically collapsing bubbles in the S&P 500," The Quarterly Review of Economics and Finance, Elsevier, vol. 83(C), pages 83-91.
    • Handle: RePEc:eee:quaeco:v:83:y:2022:i:c:p:83-91
    DOI: 10.1016/j.qref.2021.11.005
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    References listed on IDEAS

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    Cited by:

    1. Wang, Shaoping & Feng, Hao & Gao, Da, 2023. "Testing for short explosive bubbles: A case of Brent oil futures price," Finance Research Letters, Elsevier, vol. 52(C).
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    3. Yang, Hui & Ferrer, Román, 2023. "Explosive behavior in the Chinese stock market: A sectoral analysis," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    SADF; GSADF; Cointegration; Stock market bubble; Periodically collapsing bubbles;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • G1 - Financial Economics - - General Financial Markets

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