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Duration dependence testing for speculative bubbles

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Abstract

Prior research has employed a number of methods to test for speculative bubbles in asset prices, including a method based on the concept of duration dependence. This study explores whether duration dependence tests for speculative bubbles are sensitive to specification decisions. Our results question the efficacy of using measures of duration dependence to test for speculative bubbles. In particular, we find that evidence of duration dependence is sensitive to the method of correcting for discrete observation of continuous duration, the use of value-weighted versus equally weighted portfolios, and the use of monthly versus weekly runs of abnormal returns. (JEL C41, G12)

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Authors and Affiliations

  1. Department of Finance, Miami University, 45056, Oxford, OH

    Yvette S. Harman

  2. Department of Economics, Florida State University, 32306, Tallahassee, Florida

    Thomas W. Zuehlke

Authors
  1. Yvette S. Harman
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  2. Thomas W. Zuehlke
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Correspondence to Yvette S. Harman.

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Harman, Y.S., Zuehlke, T.W. Duration dependence testing for speculative bubbles. J Econ Finan 28, 147–154 (2004). https://doi.org/10.1007/BF02761607

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