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Models for Rational Speculative Bubbles

  • Sardar M. N. Islam
  • Sethapong Watanapalachaikul
Part of the Contributions to Economics book series (CE)

Abstract

Possibly the most controversial issue in finance is whether the financial market is efficient in transmitting information and the allocation of resources or not. A generation ago, a positive view known as the Efficient Market Hypothesis (EMH) was widely accepted by academic financial economists. Many crucial financial issues such as volatility, predictability, speculation and anomalies are also related to the efficiency issue and are all interdependent. The existence of bubbles has been especially controversial since the existence of bubbles contribute to market inefficiency. Binswanger states that ‘speculative bubbles are thought of as having a negative overall impact on the economy. They are supposed to create additional price risk and increase the instability of the economy’ (1999, p. 116). Therefore, in recent years there have been a number of empirical studies attempting to identify rational speculative bubbles in stock prices and returns.

Keywords

Stock Market Stock Price Stock Prex Joint Probability Density Function Dividend Yield 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2005

Authors and Affiliations

  • Sardar M. N. Islam
    • 1
  • Sethapong Watanapalachaikul
    • 1
  1. 1.Centre for Strategic Economic StudiesVictoria UniversityMelbourne City MCAustralia

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