Monte Carlo evidence [Evans (1991)] indicates that when speculative bubbles are collapsible, the traditional cointegration approach based on unit root tests has some serious drawbacks. We propose in this paper an alternative approach to test such bubbles. We demonstrate that the suggested test has some advantages over the traditional unit root based tests, especially for bubbles that are collap...

This paper demonstrates the theoretical foundation that underlies the willingness of rational arbitrageurs to delay and reinforce the speculative attack. The key assumptions are that there is a small probability that arbitrageurs are behavioral and never time the market of their own accord and it is uncertain whether arbitrageurs are behavioral or rational. We model a stock market as a timing g...

We study the speculative value of a finitely lived asset when investors disagree and short sales are limited. In this case, investors are willing to pay a speculative value for the resale option they obtain when they acquire the asset. We characterize the equilibrium speculative value as a solution to a fixed point problem for a monotone operator F. A Dynamic Programming Principle applies and i...

It is possible that under certain situations, in a relativistic heavy-ion collision, partons may expand out forming a shell like structure. We analyze the process of hadronization in such a picture for the case when the quark-hadron transition is of first order, and argue that the inside region of such a shell must correspond to a supercooled (to T = 0) deconfined vacuum. Hadrons from that regi...

Previous analyses of a large ensemble of stock markets have demonstrated that a log-periodic power law (LPPL) behavior of the prices constitutes a qualifying signature of speculative bubbles that often land with a crash. We detect such a LPPL signature in the foreign capital inflow during the bubble on the US markets culminating in March 2000. We detect a weak synchronization and lag with the N...

Rational price bubble arises when the price of an asset exceeds the asset’s fundamental value, that is, the present value of future dividend payments. The important result of Santos and Woodford (1997) says that price bubbles cannot exist in equilibrium in the standard dynamic asset pricing model with rational agents facing borrowing constraints as long as assets are in strictly positive supply...

Purpose The last decades have experienced increasingly integrated global political and economic dynamics ranging especially from the influence of exchange rates trade amid other sources uncertainties. purpose this study is to examine rate Brazil, Russia, India, China, South Africa (BRICS) Republic Turkey. Design/methodology/approach Given perceived dynamics, current examined BRICS countries Tur...

We estimate the dynamics of a speculative bubble subject to surviving and collapsing regime together with dividends returns in tractable state space specification present-value model. To this new high-dimensional model, we develop an efficient Markov chain Monte Carlo sampler simulate from joint posterior distribution. find that real-world stock price bubbles show significant Markov-switching s...