A Heterogenous Agent Foundation for Tests of Asset Price Bubbles
We provide heterogenous agent foundations for regime-switching tests of asset price bubbles, and illustrate by applying the models to historical U.S. stock market data. While the tests remain unchanged, we show the specification of regimes can be based on the beliefs of investors that come from an underlying heterogenous agent model. This allows consideration of alternative specifications for investor beliefs, straightforward interpretation of extensions to more than three regimes, and added exibility in determining the evolution of beliefs. Our empirical example shows that this can lead to results which differ from traditional regime-switching models.
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- Shu-ping Shi & Vipin Arora, 2011.
"An Application Of Models Of Speculative Behaviour To Oil Prices,"
CAMA Working Papers
2011-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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- Shu-ping Shi & Vipin Arora, 2011. "An Application Of Models Of Speculative Behaviour To Oil Prices," CAMA Working Papers 2011-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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- Simon van Norden, 1995.
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9502001, EconWPA, revised 09 Aug 1995.
- van Norden, Simon, 1996. "Regime Switching as a Test for Exchange Rate Bubbles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 219-51, May-June.
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