Universität zu Köln

Röver, Nicolas (2020). Testing for Rational Bubbles in Financial Markets - A Comparison of Different Methods and Real World Applications. Bachelor thesis, Universität zu Köln.

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Abstract

Bubbles in financial markets can cause real harm – the 2008 financial crisis had devastating effects on many peoples lives. Macroeconomic research considers a bubble in the US housing housing market to be one of the causes of this crisis. The econometric study of bubbles in financial markets is therefore highly relevant: Valid testing procedures can serve as an ex-ante warning mechanism alerting regulators to dysfunctional market behaviour. When having detected a bubble during its inflationary phase, regulators may prevent financial crises by intervening. In this thesis we focus on the testing approach by Homm, Breitung (2012). We rigorously explain their theoretical framework which allows to test empirically for rational bubbles and explain the five different test statistic put forward by Homm, Breitung (2012). Applying those statistics to the Housing Market leading up to the financial crisis in 2008 and the US stock market of the 1990s, we find evidence that bubbles were indeed present during those periods.

Item Type:	Thesis (Bachelor thesis)
Creators:	Creators Email ORCID ORCID Put Code Röver, Nicolas nicoroever@gmail.com UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-252165
Date:	2020
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Economics > Econometrics and Statistics > Professorship for Statistics and Econometrics
Subjects:	General statistics
Uncontrolled Keywords:	Keywords Language Bubbles UNSPECIFIED Unit-root tests UNSPECIFIED time-series analysis UNSPECIFIED
Date of oral exam:	2020
Referee:	Name Academic Title Kutzker, Tim Dr. Wied, Dominik Prof. Dr.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/25216