An Evaluation of Recent Evidence on Stock Market Bubbles / Robert P. Flood, Robert J. Hodrick, Paul Kaplan.

Format:

Book

Author/Creator:

Flood, Robert P.

Contributor:

National Bureau of Economic Research.

Hodrick, Robert J.

Kaplan, Paul.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1971.

NBER working paper series no. w1971

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Summary:

Several recent studies have attributed a large part of asset price volatility to self-fulfilling expectations. Such an explanation is unattractive to many since it allows allocations that need bear no particular relation to those implied by the economist's standard kit of

market fundamentals. We examine the evidence presented in some of these

studies and find (i) that all of the bubble evidence can equally well be

interpreted as evidence of model misspecification and (ii) that a slight extension of standard econometric methods points very strongly toward model misspecification as the actual reason for the failure of simple models of market fundamentals to explain asset price volatility.

Notes:

Print version record

July 1986.