Rational Bubbles and the S&P 500. An empirical approach

Óscar Martínez ()
Authors registered in the RePEc Author Service: Oscar Augusto Martinez Cusicanqui

Revista Latinoamericana de Desarrollo Economico, 2021, issue 35, 135-158

Abstract: We analyze if the dynamics of the S&P500 resemble those of a rational bubble. We find positive evidence in this question by applying the Kalman Filter to a suitable asset pricing model proposed and our conclusion is robust to three different stochastic discount factors SDFs considered: Linear Utility, Log Utility and CRRA utility. We also find evidence of a relationship between the type of SDF and the size of a bubble in the S&P500 case.

Keywords: Bubble Estimation; Kalman Filter; Stochastic Discount Factor (search for similar items in EconPapers)
JEL-codes: C13 C32 G12 (search for similar items in EconPapers)
Date: 2021
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