Detecting speculative bubbles under considerations of the sign asymmetry and size non-linearity: New international evidence

Shyh-Wei Chen and Zixiong Xie

International Review of Economics & Finance, 2017, vol. 52, issue C, 188-209

Abstract: By using the logarithms of the dividend yields of stock markets of ten European countries and nine Pacific Rime economies, this paper tends to detect speculative bubbles under considerations of the sign asymmetry and size non-linearity, respectively. The sign asymmetry and size non-linearity are theoretically explained by the multiple bubbles (or periodically collapsing bubbles) and traction costs, respectively. To this end, we adopt the right-tailed unit root test (GSADF), the momentum threshold autoregressive (MTAR) and exponential smooth transition autoregressive (ESTAR) approaches in this study. Among the main results, it is found that the results of the GSADF provide statistically significant evidence for the existence of multiple bubbles of six European countries and Malaysia and Indonesia. Second, the presence of periodically collapsing bubbles is empirically verified by the MTAR test for the Czech Republic, New Zealand and Portugal, but not for all of the Pacific Rim economies considered in this study. Third, with the exception of Malaysia, the results of the ESTAR-type tests point to the rejection of the null hypothesis of a unit root against the alternative of a globally stationary ESTAR process for all countries.

Keywords: Present value model; Periodically collapsing bubble; Non-linearity; Transaction costs (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056017302137
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:52:y:2017:i:c:p:188-209

DOI: 10.1016/j.iref.2017.09.008

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().