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Driving factors of equity bubbles

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  • Wang, Shengquan
  • Chen, Langnan

Abstract

We investigate the driving factors of equity bubbles by utilizing the panel Logit model and the dataset of 22 representative economies covering a period from 2000/Q1 to 2018/Q3. We find that the trading volume and the price volatility are the significantly positive driving factors of equity bubbles for the full sample as suggested by the bubble theories. We also find that monetary policy sheds a light on the determination of equity bubbles. Finally, the credit and its lag term play an important role in producing the equity bubbles. These baseline findings are confirmed by three robustness checks, which are conducted by alternating the bubbles identification strategy, considering the bubbles' persistence effect, and utilizing the BMA-Logit model respectively.

Suggested Citation

  • Wang, Shengquan & Chen, Langnan, 2019. "Driving factors of equity bubbles," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 304-317.
    • Handle: RePEc:eee:ecofin:v:49:y:2019:i:c:p:304-317
    DOI: 10.1016/j.najef.2019.04.014
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    1. Theodosios Perifanis, 2019. "Detecting West Texas Intermediate (WTI) Prices’ Bubble Periods," Energies, MDPI, vol. 12(14), pages 1-16, July.

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    More about this item

    Keywords

    Equity bubbles; Driving factors; BMA-Logit model;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics

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