IDEAS home Printed from https://ideas.repec.org/p/skb/wpaper/cofie-03-2008.html

Explosive Behavior in the 1990s Nasdaq: When Did Exuberance Escalate Asset Values?

Author

Listed:
  • Peter C.B.Phillips

    (Yale University, University of Auckland,University of York & Singapore Management University)

  • Yangru Wu

    (Rutgers Business School-Newark & New Brunswick, Rutgers University, & Chinese Academy of Finance and Development, Central University of Finance and Economics)

  • Jun Yu

    (Sim Kee Boon Institute for Financial Economics, Singapore Management University)

Abstract

A recursive test procedure is suggested that provides a mechanism for testing explosive behavior, date-stamping the origination and collapse of economic exuberance, and providing valid con¡¥dence intervals for explosive growth rates. The method involves the recursive im- plementation of a right-side unit root test and a sup test, both of which are easy to use in practical applications, and some new limit theory for mildly explosive processes. The test procedure is shown to have discriminatory power in detecting periodically collapsing bubbles, thereby overcoming a weakness in earlier applications of unit root tests for economic bubbles. An empirical application to Nasdaq stock price index in the 1990s provides con¡¥rmation of ex- plosiveness and date-stamps the origination of ¡¥nancial exuberance to mid -1995, prior to the famous remark in December 1996 by Alan Greenspan about irrational exuberance in ¡¥nancial market, thereby giving the remark empirical content.

Suggested Citation

  • Peter C.B.Phillips & Yangru Wu & Jun Yu, 2009. "Explosive Behavior in the 1990s Nasdaq: When Did Exuberance Escalate Asset Values?," Working Papers CoFie-03-2008, Singapore Management University, Sim Kee Boon Institute for Financial Economics.
    • Handle: RePEc:skb:wpaper:cofie-03-2008
    as

    Download full text from publisher

    File URL: http://www.smu.edu.sg/institutes/skbife/downloads/CoFiE/Working%20Papers/Explosive%20Behavior%20in%20the%201990s%20Nasdan%20When%20did%20Exuberance%20Escalate%20Asset%20Values.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:skb:wpaper:cofie-03-2008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jaymie Xu (email available below). General contact details of provider: https://edirc.repec.org/data/sesmusg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.