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Testing for the existence of a bubble in the stock market

  • Gerdesmeier, Dieter
  • Reimers, Hans-Eggert
  • Roffia, Barbara

Are specific developments in stock prices in line with fundamentals or do they reflect a rising bubble? And if the latter result applies, how is it possible to detect a bubble in real time? The answer to this question is of utmost relevance for a number of areas, not least for either financial market participants or for central banks aiming at pursuing a policy of 'leaning against the wind'. In this study, we make use of a sample of 17 OECD industrialised countries and the euro area over the sample period 1969 Q1 - 2008 Q3 and carry out univariate and multivariate panel tests to find evidence of bubbles in the stock market of those countries over the past four decades.

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Paper provided by Hochschule Wismar, Wismar Business School in its series Wismar Discussion Papers with number 01/2013.

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Date of creation: 2013
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Handle: RePEc:zbw:hswwdp:012013
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