Speculative bubbles in present-value models: A Bayesian Markov-switching state space approach

Chan, JCC; Santi, C

Speculative bubbles in present-value models: A Bayesian Markov-switching state space approach

Chan, JCC Santi, C

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Publisher:: Elsevier
Publication Type:: Journal Article
Citation:: Journal of Economic Dynamics and Control, 2021, 127, pp. 1-26
Issue Date:: 2021-06-01

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Field	Value	Language
dc.contributor.author	Chan, JCC
dc.contributor.author	Santi, C
dc.date.accessioned	2022-04-05T10:29:37Z
dc.date.available	2022-04-05T10:29:37Z
dc.date.issued	2021-06-01
dc.identifier.citation	Journal of Economic Dynamics and Control, 2021, 127, pp. 1-26
dc.identifier.issn	0165-1889
dc.identifier.uri	http://hdl.handle.net/10453/155948
dc.description.abstract	We estimate the dynamics of a speculative bubble subject to a surviving and a collapsing regime together with the dynamics of dividends and returns in a tractable state space specification of the present-value model. To estimate this new high-dimensional model, we develop an efficient Markov chain Monte Carlo sampler to simulate from the joint posterior distribution. We find that real-world stock price bubbles show significant Markov-switching structure. Further, the results indicate that dividend growth rates are highly predictable. Finally, we find that bubble variation explains a large share of the variation in the price-dividend ratio and unexpected return.
dc.language	en
dc.publisher	Elsevier
dc.relation.ispartof	Journal of Economic Dynamics and Control
dc.relation.isbasedon	10.1016/j.jedc.2021.104101
dc.rights	info:eu-repo/semantics/openAccess
dc.rights	This is an open access article under the CC BY license
dc.subject	1401 Economic Theory, 1402 Applied Economics, 1502 Banking, Finance and Investment
dc.subject.classification	Economics
dc.title	Speculative bubbles in present-value models: A Bayesian Markov-switching state space approach
dc.type	Journal Article
utslib.citation.volume	127
utslib.for	1401 Economic Theory
utslib.for	1402 Applied Economics
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access	*
pubs.consider-herdc	false
dc.date.updated	2022-04-05T10:29:30Z
pubs.publication-status	Published
pubs.volume	127

Abstract:

We estimate the dynamics of a speculative bubble subject to a surviving and a collapsing regime together with the dynamics of dividends and returns in a tractable state space specification of the present-value model. To estimate this new high-dimensional model, we develop an efficient Markov chain Monte Carlo sampler to simulate from the joint posterior distribution. We find that real-world stock price bubbles show significant Markov-switching structure. Further, the results indicate that dividend growth rates are highly predictable. Finally, we find that bubble variation explains a large share of the variation in the price-dividend ratio and unexpected return.

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http://hdl.handle.net/10453/155948