Keywords: Asset price bubbles, econometric bubble detection
Abstract: Can asset price bubbles be detected? This survey of econometric tests
of asset price bubbles shows that, despite recent advances, econometric
detection of asset price bubbles cannot be achieved with a satisfactory
degree of certainty. For each paper that finds evidence of bubbles, there is
another one that fits the data equally well without allowing for a bubble.
We are still unable to distinguish bubbles from time-varying or regime-switching
fundamentals, while many small sample econometrics problems
of bubble tests remain unresolved.
Full paper (271 KB PDF)
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Last update: January 12, 2005