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Some Preliminary Evidence on Stock Price Bubbles in an Emerging Market

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  • Nawazish Mirza

    ()
    (Center for Research in Economics and Business, Pakistan)

  • Ayesha Afzal

    ()
    (Lahore School of Economics Main Campus)

Abstract

This paper analyzes the presence of a speculative component during the extra ordinary upsurge in Karachi Stock Exchange. We implement cointegration tests, between 1997 and 2008, on price and dividends of various market and sectoral indices. The no bubble hypothesis could not be rejected for market level indices establishing the presence of a speculative factor. Among sectoral indices, banking sector depicted a speculative component, however, the price level of Oil and Gas sector did not diverge from the related dividends. These results remained robust with evidence of persistent volatility shocks for the sample period.

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Bibliographic Info

Article provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.

Volume (Year): 15 (2012)
Issue (Month): 44 (June)
Pages: 55-86

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Handle: RePEc:rej:journl:v:15:y:2012:i:44:p:55-86

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Related research

Keywords: Karachi Stock Exchange; Speculative Bubbles; Cointegration; Unit Root; Dividend Yield;

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References

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  1. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
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  14. G. Capelle-Blancard & H. Raymond, 2004. "Empirical evidence on periodically collapsing stock price bubbles," Applied Economics Letters, Taylor & Francis Journals, vol. 11(1), pages 61-69.
  15. John, Kose & Williams, Joseph, 1985. " Dividends, Dilution, and Taxes: A Signalling Equilibrium," Journal of Finance, American Finance Association, vol. 40(4), pages 1053-70, September.
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