Speculative bubbles and the real estate market application of the sequential ADF test

Kamel Naoui () and Amine Bassem

American Journal of Finance and Accounting, 2015, vol. 4, issue 2, 113-128

Abstract: The aim of this paper is to detect the presence of a real estate bubble in the US home market. Inability of classic methods such as stationary tests and co-integration methods to determine explosive behaviour in financial markets was our motivation to use a recent econometric technique developed by Phillips, Shi and Yu. This method is perfectly efficient and is considered as a bubble-detecting algorithm. Our empirical results point to the presence of an explosive behaviour in the data. Therefore, we concluded that the US home market was shaken by several bubbles before the sub-prime crisis.

Keywords: speculative bubbles; real estate market; explosive behaviour; price-rent ratio; housing market; SADF; GSADF; sequential ADF test; USA; United States; bubble detection; sub-prime crisis. (search for similar items in EconPapers)
Date: 2015
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