A new stock-price bubble with stochastically deflating trajectories
Rotermann Benedikt, Wilfling Bernd
Abstract
We propose a new, rational stock-price bubble that is able to generate recurringly explosive and stochastically deflating trajectories. Our flexible bubble process entails stock-price volatility dynamics that are consistent with real-world data. To demonstrate this, we fit our bubble specification to NASDAQ data and analyze the volatility dynamics.
Keywords
Present-value model; Evans bubble; incompletely bursting bubble; stock-price volatility; particle-filter estimation
Publication type
Working paper
Peer reviewed
No
Publication status
Published
Year
2017
Volume
58/2017
Title of series
CQE-Working-Papers
Publisher
Center for Quantitative Economics (CQE), University of Muenster
Place
University of Muenster
Language
English