A new stock-price bubble with stochastically deflating trajectories
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
Cite as
Rotermann, B., & Wilfling, B. (2017). A new stock-price bubble with stochastically deflating trajectories. In CQE-Working-Papers: Vol. 58/2017. University of Muenster: Center for Quantitative Economics (CQE), University of Muenster.Details
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