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Driving factors of equity bubbles

Shengquan Wang and Langnan Chen

The North American Journal of Economics and Finance, 2019, vol. 49, issue C, 304-317

Abstract: We investigate the driving factors of equity bubbles by utilizing the panel Logit model and the dataset of 22 representative economies covering a period from 2000/Q1 to 2018/Q3. We find that the trading volume and the price volatility are the significantly positive driving factors of equity bubbles for the full sample as suggested by the bubble theories. We also find that monetary policy sheds a light on the determination of equity bubbles. Finally, the credit and its lag term play an important role in producing the equity bubbles. These baseline findings are confirmed by three robustness checks, which are conducted by alternating the bubbles identification strategy, considering the bubbles' persistence effect, and utilizing the BMA-Logit model respectively.

Keywords: Equity bubbles; Driving factors; BMA-Logit model (search for similar items in EconPapers)
JEL-codes: E44 C58 B26 (search for similar items in EconPapers)
Date: 2019
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