On the Presence of Speculative Bubbles in Stock Prices
- 1 March 1990
- journal article
- Published by JSTOR in Journal of Financial and Quantitative Analysis
- Vol. 25 (1) , 101
- https://doi.org/10.2307/2330890
Abstract
We examine empirically the existence of speculative bubbles in U.S. stock prices and, by building on West's procedure, propose direct and computationally simple tests of the "no-bubble" hypothesis. These tests are likely to be close to their nominal size in small samples and to have small sample power against a wide class of bubbles including those orthogonal to the dividend process. We apply the tests to long-term annual U.S. stock market data for the 1871-1981 and 1871-1988 periods. Contrary to West, we do not reject the "no-bubble" hypothesis. We offer an explanation as to the cause of discrepancy between the two results.Keywords
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