Universität zu Köln

Kruse, Robinson, Kaufmann, Hendrik and Wegener, Christoph ORCID: 0000-0002-9508-7131 (2018). Bias-corrected estimation for speculative bubbles in stock prices. Econ. Model., 73. S. 354 - 365. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1873-6122

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Abstract

We provide a comparison of different finite-sample bias-correction methods for possibly explosive autoregressive processes. We compare the empirical performance of the downward-biased standard OLS estimator with an OLS and a Cauchy estimator, both based on recursive demeaning, as well as a second-differencing estimator. In addition, we consider three different approaches for bias-correction for the OLS estimator: (i) bootstrap, (ii) jackknife and (iii) indirect inference. The estimators are evaluated in terms of bias and root mean squared errors (RMSE) in a variety of practically relevant settings. Our findings suggest that the indirect inference method clearly performs best in terms of RMSE for all considered levels of persistence. In terms of bias-correction, the jackknife works best for stationary and unit root processes, but with a typically large variance. For the explosive case, the indirect inference method is recommended. As an empirical illustration, we reconsider the dot-com bubble in the NASDAQ index and explore the usefulness of the indirect inference estimator in terms of testing, date stamping and calculations on overvaluation.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Kruse, Robinson UNSPECIFIED UNSPECIFIED UNSPECIFIED Kaufmann, Hendrik UNSPECIFIED UNSPECIFIED UNSPECIFIED Wegener, Christoph UNSPECIFIED orcid.org/0000-0002-9508-7131 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-184044
DOI:	10.1016/j.econmod.2018.04.014
Journal or Publication Title:	Econ. Model.
Volume:	73
Page Range:	S. 354 - 365
Date:	2018
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1873-6122
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language AUTOREGRESSIVE TIME-SERIES; MEDIAN-UNBIASED ESTIMATION; UNIT-ROOT MODELS; CONFIDENCE-INTERVALS; JACKKNIFE ESTIMATION; EXPLOSIVE BEHAVIOR; COMMODITY-MARKETS; RANDOM-WALKS; LIMIT THEORY; TESTS Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/18404