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Speculative Bubbles in the S&P 500: Was the Tech Bubble Confined to the Tech Sector?

Chris Brooks and Apostolos Katsaris ()
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Apostolos Katsaris: ICMA Centre, University of Reading

No icma-dp2006-07, ICMA Centre Discussion Papers in Finance from Henley Business School, Reading University

Abstract: This study tests for the presence of periodically, partially collapsing speculative bubbles in the sector indices of the S&P 500 using a regime-switching approach. We also employ an augmented model that includes trading volume as a technical indicator to improve the ability of the model to time bubble collapses and to better capture the temporal variations in returns. We find that over 70% of the S&P 500 index by market capitalization, and seven of its ten sector component indices exhibited bubble-like behaviour over our sample period. Thus the speculative bubble that grew in the 1990's and subsequently collapsed was pervasive in the US equity market. The bubble affected numerous sectors including energy and industrials, rather than being confined to information technology, telecommunications and the media.

Keywords: Stock market bubbles; fundamental values; dividends; regime switching; speculative bubble test. (search for similar items in EconPapers)
JEL-codes: C51 C53 G12 (search for similar items in EconPapers)
Date: 2006-07
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Journal Article: Speculative bubbles in the S&P 500: Was the tech bubble confined to the tech sector? (2010) Downloads
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