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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Econometric Tests of Asset Price Bubbles: Taking Stock
Refet S. Gurkaynak

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.

Keywords: Asset price bubbles, econometric bubble detection

Full paper (271 KB PDF)

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Last update: January 12, 2005