S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Bank of Finland Scientific Monographs, Bank of Finland

No E:35/2006:
Bubbles in the Finnish and US equities markets

Katja Taipalus ()

Abstract: Tests for unit roots in log dividend yields, which are consistent with ‘rational bubbles’ in stock prices, are conducted for the S&P500 and Finnish stock market indexes. In addition to the traditional unit root tests, we split the data into 10-year segments and use frequency domain analysis to test for the presence of unit roots in the dividend yield data. The results strongly suggest the existence of bubbles in both the US and Finnish markets. Finally we develop a novel dividend yield-based method to track periods when stock prices divert their fundamental levels. This indicator produces promising results, as it seems to have some forecasting ability concerning booms and busts in the stock markets.

Keywords: equity price; bubble; rolling ADF; (follow links to similar papers)

JEL-Codes: G12; (follow links to similar papers)

128 pages, August 29, 2006

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

E35.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Päivi Määttä () or Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:bofism:2006_035 This page was generated on 2014-12-14 19:21:12