Rational bubbles and fractional integration
In this article we provide evidence for a rational bubble in S\&P 500 stock prices by applying a test for changing persistence under fractional integration proposed by Sibbertsen and Kruse (2007). We find strong evidence for stationary long memory before the estimated change point in 1955 and a unit root afterwards. These results bring two empirical findings in line: on one hand they confirm the previous result of fractional integration and on the other hand they support the hypothesis of a rational bubble.
|Date of creation:||Mar 2008|
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- Sibbertsen, Philipp & Kruse, Robinson, 2007.
"Testing for a break in persistence under long-range dependencies,"
Hannover Economic Papers (HEP)
dp-381, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Philipp Sibbertsen & Robinson Kruse, 2009. "Testing for a break in persistence under long-range dependencies," Journal of Time Series Analysis, Wiley Blackwell, vol. 30(3), pages 263-285, 05.
- Robert Sollis, 2006. "Testing for bubbles: an application of tests for change in persistence," Applied Financial Economics, Taylor & Francis Journals, vol. 16(6), pages 491-498.
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