IS THERE IRRATIONAL EXUBERANCE?

Chulsoo Kim ()
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Chulsoo Kim: Department of Economics, Sookmyung Women¡¯s University

Journal of Economic Development, 2004, vol. 29, issue 2, 65-80

Abstract: This paper presents a framework in which we can examine whether stock prices are overvalued or undervalued. This paper estimates equilibrium stock prices based on the Lucas (1978) tree model using the Hansen and Sargent (1980) cross-equation restriction approach and the VAR approach. By comparing equilibrium stock prices with actual stock prices, we can judge whether stock prices are overvalued or undervalued. This paper finds that Korean stock prices for the period 1983:1 to 2002:3 were valued substantially more than their equilibrium prices while US stock prices for the period 1871:1 to 2001:9 were on average valued substantially less than their equilibrium prices.

Keywords: Stock Price; Irrational Exuberance (search for similar items in EconPapers)
JEL-codes: E44 G12 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:29:y:2004:i:2:p:65-80

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