On Testing for Speculative Bubbles

Abstract

The possibility that movements in prices could be due to the self-fulfilling prophecies of market participants has long intrigued observers of free markets. This paper surveys the current state of the empirically-oriented literature concerning rational dynamic indeterminacies, by which we mean a situation of self-fulfilling prophecy within a rational expectations model. Empirical work in this area concentrates primarily on indeterminacies in price levels, exchange rates, and equity prices. We first examine a particular type of explosive indeterminacy, usually called a rational bubble, in an example of the market for equities. Then, we consider empirical work relating to price-level and exchange-rate indeterminacies and empirical studies of indeterminacies in stock prices. Finally, we take up some interpretive issues.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 385 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.