Rational Bubbles: Theoretical Basis, Economic Relevance, and Empirical Evidence with a Special Emphasis on the German Stock Market

ISBN-13: 9783540626299 / Angielski / Miękka / 1997 / 265 str.

Matthias Salge

Opis

This book evaluates formally the theory of rational bubbles. A general procedure for deriving rational bubbles is provided in the first part of the book. All bubble processes discussed in literature so far could be obtained by the procedure presented. Furthermore, the set of bubble processes has been extended significantly. After presenting the most important applications various approaches of testing for rational bubbles are summarized. Finally, a so called direct test for the existence of some previously obtained new bubble processes on the German Stock market is carried out. It became evident that the movement of stock prices, in particular during 1985 - 1987 and at the beginning of 1990s, could be well explained by the existence of rational bubbles, at least when stock indexes were used.

Spis treści

1 Introduction.- 2 On the Theoretical Derivability of Rational Bubbles.- 2.1 Statistical framework.- 2.2 Rational expectations.- 2.3 Solution procedure.- 2.3.1 Particular solution.- 2.3.1.1 Forward and backward solution.- 2.3.1.2 Explicit particular solutions.- 2.3.1.3 Summary.- 2.3.2 General solution.- 2.4 Bubble processes.- 2.4.1 Markovian bubbles.- 2.4.1.1 Deterministic bubble.- 2.4.1.2 Near random walk bubble.- 2.4.1.3 Bursting bubble.- 2.4.2 Intrinsic bubbles.- 2.4.2.1 Fundamentals as a random walk.- 2.4.2.2 Fundamentals as ARMA-processes.- 2.4.3 Extrinsic bubbles.- 2.4.4 Theoretical caveats.- 2.4.5 Summary.- 3 On the Economic Relevance of Rational Bubbles.- 3.1 Capital markets.- 3.1.1 Efficient capital markets.- 3.1.2 Rational bubbles on capital markets.- 3.1.3 Economic caveats.- 3.2 Foreign exchange markets.- 3.3 Hyperinflation.- 4 On Testing for Rational Bubbles.- 4.1 Indirect tests.- 4.1.1 Variance bounds tests.- 4.1.2 Specification tests.- 4.1.3 Integration and cointegration tests.- 4.1.4 Final assessment of indirect tests.- 4.1.5 A digression: Charemza, Deadman (1995) analysis.- 4.2 Direct tests.- 4.2.1 Deterministic bubble in German hyperinflation.- 4.2.2 Intrinsic bubbles on stock markets.- 4.2.3 An econometric caveat.- 4.2.4 Final assessment of direct tests.- 5 On the Explanatory Power of Rational Bubbles on the German Stock Market.- 5.1 Data.- 5.2 Direct test for rational bubbles.- 5.2.1 Temporary Markovian bubbles.- 5.2.2 Temporary intrinsic bubbles.- 5.2.3 Permanent intrinsic bubbles.- 5.3 A digression: Testing for unit roots.- 6 Concluding Remarks.- A Results.- A.1 Temporary markovian bubbles.- A.2 Temporary intrinsic bubbles.- A.3 Permanent intrinsic bubbles — Class 1 to 2.- A.4 Permanent intrinsic bubbles — Class 3 to 6.- A.5 Integration tests.- A.5.1 Preliminary regression of endogenous processes.- A.5.2 Preliminary regression of exogenous processes.- A.5.3 Testing for unit roots in levels.- A.5.4 Testing for unit roots in logs.- B Distributional Properties and Critical Values.- B.1 Distributional properties of t-statistics.- B.2 Critical values of t-statistics.- List of Figures.- List of Tables.