Rational bubbles and fractional integration

Robinson Kruse

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: In this article we provide evidence for a rational bubble in S\&P 500 stock prices by applying a test for changing persistence under fractional integration proposed by Sibbertsen and Kruse (2007). We find strong evidence for stationary long memory before the estimated change point in 1955 and a unit root afterwards. These results bring two empirical findings in line: on one hand they confirm the previous result of fractional integration and on the other hand they support the hypothesis of a rational bubble.

Keywords: fractional integration; bubbles; changing persistence (search for similar items in EconPapers)
JEL-codes: C12 C22 G12 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2008-03
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