Asset Price Bubbles with Specific Focus on Stock Prices in Pakistan
Busines Review - Volume 10, No. 1; ISSN:1990-6587
206 Pages Posted: 17 Jul 2015
Date Written: June 30, 2015
This research paper is an attempt to investigate Asset Price Bubbles (APB) with reference to Pakistan stock market. The analysis of time series graph shows a linear trend between Consumer Price Index (CPI) and Money Supply Index (M2I) whereas a nonlinear trend with stock prices. Moreover, the graph also shows an unequal spread with the stock prices, which indicate Heteroskedasticity. Then, descriptive statistics test shows high Standard Deviations for stock prices compared with CPI and M2I, which indicate a higher volatility in stock prices. Finally, the hypothesis test for equality of variance concluded the presence of Asset Price Bubbles by rejecting null hypothesis of equal volatility against the alternative hypothesis of greater volatility in stock prices.
Keywords: Asset Price Bubbles; Stock Prices; Consumer Price Index; Heteroskedasticity; volatility
JEL Classification: B22, C12, C43
Suggested Citation: Suggested Citation