Periodically collapsing Evans bubbles and stock-price volatility

Benedikt Rotermann and Bernd Wilfling

No 2813, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

Abstract: This paper analyzes conditional stock-price volatility within in present-value framework including (rational) periodically collapsing bubbles as introduced by Evans (1991). To this end, we derive an analytically closed-form volatility formula of the stock price. The formula establishes a direct link between the bubble component and stock-price volatility. Using a Bayesian Monte-Carlo estimation technique (the particle filter), we demonstrate how to fit the parametric volatility equation to stock-market data.

Keywords: Present value model; Evans bubbles; conditional volatility; particle filter estimation (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2013-11
New Economics Papers: this item is included in nep-ecm
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https://www.wiwi.uni-muenster.de/cqe/sites/cqe/fil ... r/CQE_WP_28_2013.pdf Version of November, 2013 (application/pdf)

Related works:
Journal Article: Periodically collapsing Evans bubbles and stock-price volatility (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cqe:wpaper:2813

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