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Some Preliminary Evidence on Stock Price Bubbles in an Emerging Market

Author

Listed:
  • 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.

Suggested Citation

  • Nawazish Mirza & Ayesha Afzal, 2012. "Some Preliminary Evidence on Stock Price Bubbles in an Emerging Market," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(44), pages 55-86, June.
    • Handle: RePEc:rej:journl:v:15:y:2012:i:44:p:55-86
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Karachi Stock Exchange; Speculative Bubbles; Cointegration; Unit Root; Dividend Yield;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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