Rational bubbles and volatility persistence in India stock market

Ibrahim Onour

MPRA Paper from University Library of Munich, Germany

Abstract: This paper employs a combination of unit root tests and fractional integration technique to test for rational bubbles in Bombay Stock Exchange (BSE). It is indicated in the paper that evidence of a unit root in dividend yield is consistent with presence of rational bubbles in the stock prices. The results in the paper strongly support evidence of rational bubbles in BSE. Moreover, the paper also investigates the degree of conditional volatility persistence to show persistence of shocks to stock price volatility is short-termed.

Keywords: Bubbles; Unit root; Fractional integration; Dividend yield (search for similar items in EconPapers)
JEL-codes: C01 D53 E22 (search for similar items in EconPapers)
Date: 2009-11-11
New Economics Papers: this item is included in nep-cwa
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