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Testing for the existence of a bubble in the stock market

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  • Gerdesmeier, Dieter
  • Reimers, Hans-Eggert
  • Roffia, Barbara

Abstract

Are specific developments in stock prices in line with fundamentals or do they reflect a rising bubble? And if the latter result applies, how is it possible to detect a bubble in real time? The answer to this question is of utmost relevance for a number of areas, not least for either financial market participants or for central banks aiming at pursuing a policy of 'leaning against the wind'. In this study, we make use of a sample of 17 OECD industrialised countries and the euro area over the sample period 1969 Q1 - 2008 Q3 and carry out univariate and multivariate panel tests to find evidence of bubbles in the stock market of those countries over the past four decades.

Suggested Citation

  • Gerdesmeier, Dieter & Reimers, Hans-Eggert & Roffia, Barbara, 2013. "Testing for the existence of a bubble in the stock market," Wismar Discussion Papers 01/2013, Hochschule Wismar, Wismar Business School.
    • Handle: RePEc:zbw:hswwdp:012013
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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