✦ LIBER ✦
Detecting periodically collapsing bubbles: a Markov-switching unit root test
✍ Scribed by Stephen G. Hall; Zacharias Psaradakis; Martin Sola
- Publisher
- John Wiley and Sons
- Year
- 1999
- Tongue
- English
- Weight
- 143 KB
- Volume
- 14
- Category
- Article
- ISSN
- 0883-7252
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✦ Synopsis
This paper addresses the problem of testing for the presence of a stochastic bubble in a time series in the case that the bubble is periodically collapsing so that the asset price keeps returning to the level implied by the market fundamentals. As this is essentially a problem of identifying the collapsing periods from the expanding ones, we propose using a generalization of the Dickey±Fuller test procedure which makes use of the class of Markov regime-switching models. The potential of the new methodology is illustrated via simulation, and an empirical example is given.