Periodically Collapsing Bubbles in the Us Stock Market?

Posted: 8 Dec 2003

Abstract

The existence of periodically collapsing bubbles in stock markets, applying the Enders-Siklos momentum threshold autoregressive model, is empirically investigated in this paper. Using this non-linear time series technique, we are now able to analyse bubble driven run-ups in stock prices followed by a crash in a cointegration framework with asymmetric adjustment. Therefore, applying this technique makes possible a deeper insight into the behavior of stock prices than was previously possible using conventional cointegration tests. Although the results from the subsample 1871 - 1995 cannot be interpreted in favor of the existence of periodically collapsing bubbles in the US stock market, the findings from the 1871 - 2001 sample period indicate their presence.

Keywords: Periodically Collapsing Bubbles, Asymmetric Adjustment, Threshold Cointegration

JEL Classification: G12, E44, C32

Suggested Citation

Bohl, Martin T., Periodically Collapsing Bubbles in the Us Stock Market?. Available at SSRN: https://ssrn.com/abstract=459278

Martin T. Bohl (Contact Author)

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

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