Rational Bubbles Exist in the G-7 Stock Markets? Threshold Cointegration Approach

Li-Hung Wu ()
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Li-Hung Wu: College of Business Feng Chia University and Department of Accounting and Information Technology Ling Tung University, Taichung, Taiwan

Journal for Economic Forecasting, 2013, issue 4, 32-43

Abstract: The purpose of this paper is to investigate whether rational bubbles exist in the G-7 stock markets during the period from January 1980 to July 2008 using the threshold cointegration approach with asymmetric adjustments advanced by Enders and Siklos (2001). The results of threshold cointegration technique reveal that rational bubbles are nonexistent in both Canadian and Japanese stock markets during the period from January 1980 to July 2008. Further, the positive deviations from values are eliminated quicker than negative deviations and the price (not the dividend) is responsible for most of the adjustments.

Keywords: rational bubbles; Threshold Cointegration Test; asymmetric adjustment (search for similar items in EconPapers)
JEL-codes: C14 C22 G12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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