Title

Intrinsic bubbles revisited : evidence from nonlinear cointegration and forecasting

Document Type

Journal article

Source Publication

Journal of Forecasting

Publication Date

7-1-2004

Volume

23

Issue

4

First Page

237

Last Page

250

Keywords

Forecasting, Intrinsic bubbles, Kalman filter, Nonlinear cointegration, Random walk

Abstract

This paper offers strong further empirical evidence to support the intrinsic bubble model of stock prices, developed by Froot and Obstfeld (American Economic Review, 1991), in two ways. First, our results suggest that there is a long-run nonlinear relationship between stock prices and dividends for the US stock market during the period 1871-1996. Second, we find that the out-of-sample forecasting performance of the intrinsic bubbles model is significantly better than the performance of two alternatives, namely the random walk and the rational bubbles model.

DOI

10.1002/for.909

Print ISSN

02776693

Publisher Statement

Copyright © 2004 John Wiley & Sons, Ltd. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Ma, Y., & Kanas, A. (2004). Intrinsic bubbles revisited: Evidence from nonlinear cointegration and forecasting. Journal of Forecasting, 23(4), 237-250. doi: 10.1002/for.909

Share

COinS