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Detecting speculative bubbles under considerations of the sign asymmetry and size non-linearity: New international evidence

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  • Chen, Shyh-Wei
  • Xie, Zixiong

Abstract

By using the logarithms of the dividend yields of stock markets of ten European countries and nine Pacific Rime economies, this paper tends to detect speculative bubbles under considerations of the sign asymmetry and size non-linearity, respectively. The sign asymmetry and size non-linearity are theoretically explained by the multiple bubbles (or periodically collapsing bubbles) and traction costs, respectively. To this end, we adopt the right-tailed unit root test (GSADF), the momentum threshold autoregressive (MTAR) and exponential smooth transition autoregressive (ESTAR) approaches in this study. Among the main results, it is found that the results of the GSADF provide statistically significant evidence for the existence of multiple bubbles of six European countries and Malaysia and Indonesia. Second, the presence of periodically collapsing bubbles is empirically verified by the MTAR test for the Czech Republic, New Zealand and Portugal, but not for all of the Pacific Rim economies considered in this study. Third, with the exception of Malaysia, the results of the ESTAR-type tests point to the rejection of the null hypothesis of a unit root against the alternative of a globally stationary ESTAR process for all countries.

Suggested Citation

  • Chen, Shyh-Wei & Xie, Zixiong, 2017. "Detecting speculative bubbles under considerations of the sign asymmetry and size non-linearity: New international evidence," International Review of Economics & Finance, Elsevier, vol. 52(C), pages 188-209.
    • Handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:188-209
    DOI: 10.1016/j.iref.2017.09.008
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    Cited by:

    1. Jean-Louis Bago & Koffi Akakpo & Imad Rherrad & Ernest Ouédraogo, 2021. "Volatility Spillover and International Contagion of Housing Bubbles," JRFM, MDPI, vol. 14(7), pages 1-14, June.
    2. Yao, Can-Zhong & Li, Hong-Yu, 2021. "A study on the bursting point of Bitcoin based on the BSADF and LPPLS methods," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    3. De Pace, Pierangelo & Rao, Jayant, 2023. "Comovement and instability in cryptocurrency markets," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 173-200.
    4. Chen, Shyh-Wei & Wu, An-Chi, 2018. "Is there a bubble component in government debt? New international evidence," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 467-486.
    5. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    6. Huerta-Sanchez, Daniel & Jafarinejad, Mohammad & Kim, Dongshin & Soyeh, Kenneth W., 2020. "Disentangling bubbles in equity REITs," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 357-367.
    7. Ganapathy G Gangadharan & N. Suresh, 2022. "Interrogation of A Bubble in the Indian Market," Papers 2207.13444, arXiv.org.
    8. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.

    More about this item

    Keywords

    Present value model; Periodically collapsing bubble; Non-linearity; Transaction costs;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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