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Revisiting rational bubbles in the G-7 stock markets using the Fourier unit root test and the nonparametric rank test for cointegration

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  • Ye, Yonggang
  • Chang, Tsangyao
  • Hung, Ken
  • Lu, Yang-Cheng

Abstract

This paper re-investigates whether rational bubbles existed in the G-7 stock markets during the period of January 2000–June 2009 using the newly developed Fourier unit root test and a nonparametric rank test for cointegration. The empirical results from our Fourier unit test indicate that the null hypothesis of I(1) unit root in stock prices can be rejected for Canada, France, Italy and the UK. However, the empirical results from the rank test reveal that rational bubbles did not exist in the G-7 stock markets during the sample period.

Suggested Citation

  • Ye, Yonggang & Chang, Tsangyao & Hung, Ken & Lu, Yang-Cheng, 2011. "Revisiting rational bubbles in the G-7 stock markets using the Fourier unit root test and the nonparametric rank test for cointegration," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 82(2), pages 346-357.
    • Handle: RePEc:eee:matcom:v:82:y:2011:i:2:p:346-357
    DOI: 10.1016/j.matcom.2011.08.008
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    2. Potrykus, Marcin, 2023. "Investing in wine, precious metals and G-7 stock markets – A co-occurrence analysis for price bubbles," International Review of Financial Analysis, Elsevier, vol. 87(C).

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