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Testing for Bubbles in Stock Markets with Irregular Dividend Distribution

Itamar Caspi and Meital Graham Rozen

MPRA Paper from University Library of Munich, Germany

Abstract: Recursive right-tailed unit root tests have recently become a popular tool to test the existence of stock price bubbles. These tests require continuous data on dividend distribution that is not always available, in particular when it comes to sectoral indexes or individual stocks. In this paper we show that it is possible to circumvent this problem by applying the test to an equity bubble using the book-to-market ratio. We illustrate our framework by testing for a bubble in the Israeli stock market, where data on continuous dividend distribution are uncommon.

Keywords: Bubbles; stock markets; book-to-market; explosive root; GSADF test; Israel (search for similar items in EconPapers)
JEL-codes: C12 C15 G12 G15 (search for similar items in EconPapers)
Date: 2017-04-24, Revised 2017-10-29
New Economics Papers: this item is included in nep-cfn
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Related works:
Journal Article: Testing for bubbles in stock markets with irregular dividend distribution (2018) Downloads
Working Paper: Testing for Bubbles in Stock Markets With Irregular Dividend Distribution (2016) Downloads
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