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How to identify the different phases of stock market bubbles statistically?

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Listed:
  • Lajos Horváth
  • Hemei Li
  • Zhenya Liu

    (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)

Abstract

Eugene Fama once mentioned in 2016 that people have not come up with ways of identifying bubbles statistically. This paper presents the nonparametric change-point method to identify different stages of stock bubbles, and we derive its asymptotic distribution under the null hypothesis. By simulation, we obtain the corresponding critical value. In the empirical analysis, we employ this test and binary segmentation method to the 1990s Nasdaq bubble and get the same result as Phillips et al. (2011). We also apply this test to the S&P 500 index, the Shanghai stock index, the Nikkei 225 index, the FTSE 100 index, and the CAC 40 index respectively, and successfully identify the bubbles’ different phases in each stock market.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Lajos Horváth & Hemei Li & Zhenya Liu, 2021. "How to identify the different phases of stock market bubbles statistically?," Post-Print hal-03511435, HAL.
    • Handle: RePEc:hal:journl:hal-03511435
    DOI: 10.1016/j.frl.2021.102366
    Note: View the original document on HAL open archive server: https://hal.science/hal-03511435
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    Cited by:

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    2. Dettoni, Robinson & Gil-Alana, Luis A. & Yaya, OlaOluwa S., 2024. "Stock market prices and Dividends in the US: Bubbles or Long-run equilibria relationships?," International Review of Financial Analysis, Elsevier, vol. 94(C).
    3. Dettoni, Robinson & Gil-Alana, Luis Alberiko, 2023. "Testing the hypothesis of duration dependence in the U.S. housing market," Finance Research Letters, Elsevier, vol. 58(PD).
    4. Potrykus, Marcin, 2023. "Investing in wine, precious metals and G-7 stock markets – A co-occurrence analysis for price bubbles," International Review of Financial Analysis, Elsevier, vol. 87(C).
    5. Aktham Maghyereh & Hussein Abdoh, 2022. "Bubble contagion effect between the main precious metals," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 40(1), pages 43-63, March.
    6. Li, Boyan & Diao, Xundi, 2023. "Structural break in different stock index markets in China," The North American Journal of Economics and Finance, Elsevier, vol. 65(C).
    7. Ye Chen & Jian Li & Qiyuan Li, 2023. "Seemingly Unrelated Regression Estimation for VAR Models with Explosive Roots," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(4), pages 910-937, August.

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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