Abstract:
Asset bubbles can be described through the rational bubble solution of the standard stock price model linking stock prices and dividends. We show how the hypothesis of a rational bubble can be tested in the context of a bivariate coexplosive vector autoregression. The methodology is illustrated using US stock prices and dividends for the period 1974–2000.
Citation:
Engsted, T., & Nielsen, B. (2012), 'Testing for rational bubbles in a coexplosive vector autoregression', The Econometrics Journal, Vol. 15, Issue 2, pp. 226–254, Oxford University Press (OUP), https://doi.org/10.1111/j.1368-423x.2012.00369.x