Evidence of Bubbles in the Korean Stock Markets
25 Pages Posted: 4 May 2001
Date Written: April 2001
Abstract
Several markov-switching models are used to test for the pres-ence of bubbles in the Korean stock market. Using Korea stock price index (KOSPI) and other macroeconomic variables, an ADF test and cointegration rank test are performed. We found that KOSPI is cointegrated with other macroeconomic variables. The residuals from this cointegrated regression, which should be a stationary process, are tested using a Markov-switching model. We found that there is a regime-switching structure in the resid-uals that appears to be inconsistent with a stationary process. On the basis of these findings we tentatively conclude that this can be evidence of the existence of bubbles in the Korean stock market.
JEL Classification: E3, C2
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
On the Inception of Rational Bubbles in Stock Prices
By Behzad Diba and Herschel I. Grossman
-
Rational Bubbles in Stock Prices?
By Behzad Diba and Herschel I. Grossman
-
Intrinsic Bubbles: the Case of Stock Prices
By Kenneth Froot and Maurice Obstfeld
-
Bubbles, Fads, and Stock Price Volatility Tests: a Partial Evaluation
-
Was There a Bubble in the 1929 Stock Market?
By Peter Rappoport and Eugene N. White
-
Asset Price Bubbles in Incomplete Markets
By Robert A. Jarrow, Philip Protter, ...
-
Asset Price Volatility, Bubbles, and Process Switching
By Robert P. Flood and Robert J. Hodrick