Econometric Tests of Asset Price Bubbles: Taking Stock

By R. Gürkaynak. 2008

531 citations recorded by the source corpus.

Can asset price bubbles be detected? This survey of econometric tests of asset price bubbles shows that, despite recent advances, econometric detection of asset price bubbles cannot be achieved with a satisfactory degree of certainty. For each paper that finds evidence of bubbles, there is another one that fits the data equally well without allowing for a bubble. We are still unable to distinguish bubbles from time-varying or regime-switching fundamentals, while many small sample econometrics problems of bubble tests remain unresolved.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8db239df1b0580cd35b4e3ee9c8236e133b83750

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

A systematic review of the bubble dynamics of cryptocurrency prices (2020, unknown): “Gurkaynak [2008] documents that asset bubble tests cannot manage to oﬀer adequate information about the existence or not of bubbles.”
Clarifications to questions and criticisms on the Johansen–Ledoit–Sornette financial bubble model (2011, background): “remains an unsolved problem in standard econometric and financial economic approaches [67, 68], due to (i) the fact that the fundamental value is in general poorly constrained and (ii) the difficulty in distinguishing between an exponentially growing fundamental price and exponentially growing bubbl”
Episodes of Exuberance in Housing Markets: In Search of the Smoking Gun (2016, unknown): “, Himmelberg et al. (2005) and Girouard et al.”
Testing for Multiple Bubbles: Historical Episodes of Exuberance and Collapse in the S&P 500 (2015, unknown): “Several attempts to develop econometric tests have been made in the literature going back some decades (see Gurkaynak, 2008, for a recent review).”
Crypto-currency bubbles: an application of the Phillips–Shi–Yu (2013) methodology on Mt. Gox bitcoin prices (2015, background): “6 For a survey of this approach, see Gurkaynak (2008).”
Asset Price Bubbles and Systemic Risk (2019, unknown): “, in Gutierrez (2013); Bohl, Kaufmann, and Stephan (2013); Etienne, Irwin, and Garcia (2014); Jiang, Phillips, and Yu (2015).”
Bubble Diagnosis and Prediction of the 2005-2007 and 2008-2009 Chinese Stock Market Bubbles (2009, unknown): “In addition, we stress that the method relie s essentially on the competition between the positive feedback loop of higher return anticipations competin g with negative feedback spirals of crash expectations (Ide and Sornette, 2002), which is at the origin of the accele ration oscillations. In the s”
Recent House Price Developments (2006, background): “See for example Gallin (2003) and Gurkaynak (2005) stressing several drawbacks from using an econometric approach for such purposes.”
Financial Crises: Explanations, Types, and Implications (2013, unknown): “…these channels, but formal econometric tests are most often not powerful enough to separate bubbles from rational increases in prices, let alone to detect the causes of bubbles (Gürkaynak, 2008).7 Bubbles may also be the results of the same factors that are argued to lead to asset price anomalies.”
Real time monitoring of asset markets: Bubbles and crises (2018, background): “To meet the need for ongoing market surveillance, the recent literature on bubble detection has focused on real-time monitoring techniques rather than ex-post identification strategies which were emphasized in earlier research (see Gürkaynak (2008) for a review).”
Allowance Price Drivers in the First Phase of the EU ETS (2010, background): “Gurkaynak [37] provides a survey of bubble tests, among which cointegration and regime-switching tests appear to be most promising in the permit market context.”
Negative bubbles and shocks in cryptocurrency markets (2016, background): “However, beyond these definitions, and real economic suffering, both the theoretical existence of bubbles, and issues related to their empirical detection, remain hotly debated (Gurkaynak, 2008; Vogel and Werner, 2015).”
From Hero to Zero: Evidence of Performance Reversal and Speculative Bubbles in German Renewable Energy Stocks (2013, unknown): “The reader may refer to Gürkaynak (2008) for a comprehensive survey of econometric techniques widely used to detect bubbles in asset prices.”