Financial bubbles and recent behaviour of the Latin American stock markets
DOI:
https://doi.org/10.17533/udea.le.n81a3Keywords:
Speculative bubbles, random walk, sign test, Latin American and US stock marketsAbstract
To contrast recent hypotheses in the economic literature stating that the formation of periodic and synchronized bubbles in global markets is a consequence of portfolio asset migrations, the financial bubbles of the Latin American stock markets with the biggest relative market size are estimated in this paper. Also, the chronology of the bubbles is compared to the one estimated for the United States. The bubbles are estimated using a sign test based on recursive median adjustment, which is used to test the null hypothesis of a random walk against the alternative of explosive processes. Empirical evidence is found that confirms the original hypothesis and allows exploring possible expansions thereof.
Downloads
References
Abreu, Dilip y Brunnermeier, Marcus (2003). “Bubbles and Crashes”, Econometrica, Vol. 71, Issue 1, pp. 173-204.
Allen, Franklin y Gale, Douglas (2000). “Bubbles and crises”, The Economic Journal, Vol. 110, Issue 460, pp. 236–255.
Branchs, William y Evans, George (2011). “Learning about Risk and Return: A Simple Model of Bubbles and Crashes”, American Economic Journal: Macroeconomics, Vol. 3, Issue 3, pp. 159-191.
Caballero, Ricardo; Farhi, Emmanuel y Gourinchas, Pierre-Olivier (2008a). “Financial Crash, Commodity Prices and Global Imbalances”, Brookings Papers on Economic Activity, Fall, pp. 1-55.
Caballero, Ricardo; Farhi, Emmanuel y Gourinchas, Pierre-Olivier (2008b). “An Equilibrium Model Of Global Imbalances and Low Interest Rate”, American Economic Review, Vol. 98, Issue 1, pp. 358-393.
Diba, Behzad y Grossman, Herschel (1987). “On the inception of rational bubble”, Quarterly Journal of Economics, Vol. 87, Issue 3, pp. 697–700.
Diba, Behzad y Grossman, Herschel (1988). “The theory of rational bubbles in stock prices”, The Economic Journal, 98, Issue 392, pp. 746–754.
Evans, George (1991). “Pitfalls in testing for explosive bubbles in asset prices”, American Economic Review, Vol. 81, Issue 4, pp. 922–930.
Farmer, Roger E. A. (2012). “Confidence, crashes and animal spirits”, Economic Journal, Vol. 122, Issue 559, pp. 155–172.
Froot, Kenneth y Obstfeld, Maurice (1991). “Intrinsic bubbles: the case of stock prices”, American Economic Review, Vol. 81, Issue 5, pp. 1189–1214.
Gurkaynak, Refet (2008). “Econometrics Test of Asset Price Bubbles: Taking Stock”, Journal of Economic Surveys, Vol. 22, Issue 1, pp. 166-186.
Hall, Stephen y Sola, Martin(1993). “Testing for Collapsing Bubbles: an Endogenous Switching ADF test”, Discussion Paper, pp. 15-93. London Business School.
Hall, Stephen; Psaradakis, Zacharias y Sola, Martin (1999). “Detecting Periodically Collapsing Bubbles: a Markov-Switching Unit Root Test”, Journal of Applied Econometrics, Vol.14, Issue 2, pp. 143–154.
Hamilton, James y Whiteman, Charles(1985). “The observable implications of self-fulfilling expectations”, Journal of Monetary Economics, Vol.16, Issue 3, pp. 353–373.
Hoover, Kevin; Johansen, Søren y Juselius, Katarina (2008). “Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression”, American Economic Review, Vol. 98, Issue 2, pp. 251-255.
LeRoy, Stephen y Porter, Richard (1981). “The present-value relation: tests based on implied variance Bounds”, Econometrica, Vol. 49, pp. 555–574.
Phillips, Peter C.B.; Shi, Shu-Ping y Yu, Jun (2012). “Testing for multiple bubbles”. Cowles Foundation Discussion Paper, 1843. Yale University. Recuperado de: http://cowles.econ.yale.edu/P/cd/d18a/d1843.pdf (15 de Enero de 2014).
Samuelson, Paul (1958). “An exact consumption-loan model of interest with or without the social contrivance of money”, Journal of Political Economy, Vol. 66, Issue 6, pp. 467–482.
Schwartz, Anna (2009). “Origins of Financial Markets Crisis of 2008”. En: Booth, Philip (Ed.), Verdict on the Crash: Causes and Policy Implications (45-50). London: The Institute of Economic Affairs.
Shell, Karl (1971). “Notes on the Economics of Infinity”, Journal of Political Economy, Vol. 79, Issue 5, pp. 1002-1011.
Shiller, Robert (1981). “Do stock prices move too much to be justified by subsequent changes in dividends?”, American Economic Review, Vol.71, pp. 421–436.
Shiller, Robert (2000). Irrational Exuberance. Princeton: Princeton University Press.
So, Beong Soo y Shin, Dong Wan (2001). “An Invariant Sign Test for Radom Walks Base On Recursive Median Adjustment”, Journal of Econometrics, Vol. 102, Issue 2, pp. 197-229.
Tirole, Jean (1982). “On the Impossibility of Speculation Under Rational Expectations”, Econometrica, Vol. 50, Issue 5, pp. 1163–1181.
Tirole, Jean (1985). “Asset bubbles and overlapping generations”, Econometrica, Vol. 53, Issue 6, pp. 1499–1528.
Uribe, Jorge Mario(2013). “Testing for Multiple Bubbles with Daily Data”. Documento de trabajo. Banco de la República de Colombia. Recuperado de: http://banrep.gov.co/en/node/32390 (15 de Enero de 2014).
Uribe, Jorge Mario y Ulloa, Inés María (2011). “Revisando la hipótesis de los mercados eficientes: nuevos datos, nuevas crisis y nuevas estimaciones”, Revista Cuadernos de Economía, Vol. 30, No. 55, pp. 127-154.
van Norden, Simon (1996). “Regime Switching as a Test for Exchange Rate Bubbles”, Journal of Applied Econometrics, Vol. 11, Issue 3, pp. 219-51.
van Norden, Simon y Vigfusson, Robert (1998). “Avoiding the pitfalls: can regime-switching tests reliably detect bubbles?”, Studies in Nonlinear Dynamics and Econometrics, Vol. 3, pp. 1–22.
West, Kenneth (1987). “A specification test for speculative bubbles”, Quarterly Journal of Economics, Vol. 102, Issue 3, pp. 553–580.
Wu, Yangru (1997). “Rational bubbles in the stock market: accounting for the U.S. stock-price volatility”, Economic Inquiry, Vol. 35, Issue 2, pp. 309–319.
Published
How to Cite
Issue
Section
License
This page, by Universidad de Antioquia, is licensed under a Creative Commons Attribution License.
Authors who publish with this journal agree to retain copyright and grant the journal right of first publication, with the article licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License allowing others to share it as long as they acknowledge its authorship and original publication in this journal.
Authors can enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), provided that these arrangements be not for profit and the journal be acknowledged as the original source of publication.
Authors are permitted and encouraged to post their papers online (e.g., in institutional repositories or on their websites), as it can lead to valuable exchanges as well as greater citation of the published work.
