 Are there periodically collapsing bubbles in the stock markets? New international evidenceShyh-Wei Chen, Chi-Sheng Hsu and Zixong Xie Economic Modelling, 2016, vol. 52, issue PB, 442-451 Abstract: A stock price may face a bubble problem for a number of periods, but in the long run the stock price is determined by its market fundamentals. This paper takes this possibility into account and examines whether there are periodically collapsing bubbles in four international stock markets, i.e., the US, Belgium, Denmark and Finland. We test for the presence of periodically collapsing bubbles by examining the nonstationarity of the log dividend yields based on the dividend discount model. Among the main results, it is found that the hypothesis of the rational bubbles cannot be rejected for these stock markets. In addition, the empirical evidence does not favor the hypothesis of the periodically collapsing bubbles provided that nonlinear adjustment and structural break are allowed. The presence of the rational bubbles, but not the periodically collapsing bubbles, is in line with the rational expectations and efficient market hypothesis. Keywords: Dividend discount model; Periodically collapsing bubble; Nonlinearity; Structural break (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:52:y:2016:i:pb:p:442-451 DOI: 10.1016/j.econmod.2015.09.025 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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