Working paper

Asset price bubbles in the Australian market

3 Jun 2016
DOI

http://doi.org/10.4225/50/583e0e4c4925f
Description

A study of market bubbles is generally considered a test of market eciency (or ineciency) since bubbles are concerned with rising prices that are detached from their fundamental values. Verifying the existence of such an ineciency requires us to be able to appropriately formulate fundamental value, which typically assumes homogeneous and rational investors. Requiring additional attention is the issue of persistence. Cochrane (1991) and Chung and Lee (1998) suggest that deviations, which slowly return to fundamental values, are more indicative of a 'fad' as opposed
to a bubble. As such, an additional dimension in this de nition is associated with the duration of the ineciency.

Publication Details
Identifiers: 
DOI: 
10.4225/50/583e0e4c4925f
Published year only: 
2016

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