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The upsurge of globalization has made investors cautious toward investing decisions, and, resultantly, sophisticated techniques of forecasting and analyzing the stock markets have emerged. Particularly, this trend has gained momentum in emerging economies. One such trend is to overcome the investing risks associated with formation of rational bubbles. Bubbles are formed when asset prices inflate to a very high level temporarily, and they ultimately burst. Investors may take advantage of this short-lived phenomenon and gain high returns, but may also suffer as the entire investing value declines when the bubble bursts. The purpose of this paper is to identify rational bubbles in the emerging capital markets of South Asian region.

The monthly data have been obtained from June 1997 to February 2018 for Pakistan, Bombay, Dhaka and Colombo stock markets, and supremum-Augmented Dicky Fuller test developed by Phillips and Yu (2011) has been utilized to identify the rational bubbles.

The results revealed the presence of rational bubbles in South Asian equity markets. The current study is of significant nature for the facilitation of investors in future-making investing decisions concerning with the formation of rational bubbles.

Several studies have been conducted on stock markets of developed regions. Specific bubble episodes, which occurred previously, have helped the researchers and investors in gaining plenty of insights. A lot of studies have been conducted on the SAARC region as well. But they have used the conventional unit root test for bubble identification and not used as extensive data as, in this study, have been taken. This research is aimed to study equity prices of the four stock markets to establish the fact that if rational bubbles exist in the index, they are reflected in the returns or not.

The purpose of this paper is to re-examine the presence of rational speculative bubbles in the Malaysian stock market in light of contradictory results presented in previous studies.

The authors use descriptive statistics, explosiveness tests and the duration dependence test. They use an expanded data set that encompasses at least two alleged bubble episodes addressing a significant limitation of previous studies. The authors use both monthly and weekly returns addressing concerns about the sensitivity of duration dependence test results to the use of monthly versus weekly returns, as well as a battery of alternative measures of returns.

The authors detect bubble footprints but they do not appear to be rational. They found no evidence of rational speculative bubbles over the sample period regardless of whether monthly or weekly returns was used. The authors suggest that if there were bubbles in the Malaysian stock market, they might have been caused by irrational investor behaviour. The authors’ results do not support the suggestion that the duration dependence test is sensitive to the use of monthly versus weekly returns.

Despite the absence of rational bubbles in the Malaysian stock market, the faint bubble footprints detected still suggest caution for investors, as the authors cannot categorically rule out the presence of irrational bubbles.

This paper clarifies conflicting results of previous studies. It also contributes to the literature on bubble testing by presenting new evidence from an emerging market refuting the claim that duration dependence test results are sensitive to the use of either weekly or monthly returns.

The purpose of this paper is to examine the existence of rational speculative bubbles in the Middle East and North African (MENA) stock markets.

To complement shortcomings of the traditional bubble tests, such as unit root tests and cointegration tests, mainly relying on expectations of future steams of dividends, the authors employ fractional integration tests and duration dependence tests.

Despite recent extreme fluctuations of MENA stock markets, fractional integration tests built on autoregressive fractionally integrated moving average models do not support the possibility of bubbles in the MENA stock markets. Similarly, duration dependence tests based on nonparametric Nelson‐Aalen hazard functions not only reject the existence of bubbles but also support equality of hazard functions between domestic and the US‐based investors without regard to the rapid financial liberalization and integration in the MENA stock markets.

The reliable results of bubble tests of the MENA stock markets provide domestic and international investors as well as policy makers with invaluable benchmark to better understand the irregular and highly fluctuating stock market behaviors of the MENA stock markets compared to other developed and emerging stock markets. For domestic and international investors, the formal analysis of MENA stock markets behavior including rational speculative bubbles will help them in their portfolio decisions and hedging purposes. Similarly, the empirical results of bubble tests in the paper will be also helpful to policymakers in MENA countries to take actions to improve the functioning of these dynamic markets.

This chapter presents several approaches for identifying and dating the speculative bubble on real estate market. Using the real estate price index (IPAI), statistical and structural approaches were combined in order to detect the existence of a bubble on the Moroccan real estate market. The results obtained affirm that the Moroccan real estate market experienced a speculative bubble during the period 2006–2008 explained mainly by the boom of credit during the same period. The use of the Markov switching model affirmed that the speculative bubble on Morocco is cyclic and consequently corroborates the critic formulated by Evans (1991) concerning the traditional approaches for the detection of financial bubbles. Thus, the analysis of the series of the bubble, extracted using the Kalman filter, affirms the existence of two regimes, namely an explosive regime and a normal regime. The first regime describes the periods of explosion of the bubble and lasts for about 9 quarters, while the second, lasting for 14 quarters, describes the periods of return to the average cycle.

Beijing and Shanghai have been the leading housing markets in urban China. In the late half of the 2000s, both metropolises experienced a pronounced process of housing price appreciation. The purpose of this paper is to examine whether there exist housing price bubbles in the two largest cities in China.

The study is based on a combination of different quantitative indicators: a comparison of housing market prices with the rational expectation price, mortgage loans, and the ratios of price to income and to rent. Moreover, the statistical tool of control chart is introduced to quantify housing bubbles.

The study shows that Beijing appears to have been on the way of forming a housing price bubble between 2005 and 2008, and that there perhaps existed a housing bubble in Shanghai from 2003 to 2004. It appears that the housing market cycle in Beijing may be divided into three stages: the cycle peak stage (1991‐1997), the cycle trough stage (1998‐2003) and the second cycle peak stage (2004‐2008).

In an attempt to explain the possible existence of housing bubbles in Beijing and Shanghai, this paper uses an integrated strategy involved with such fundamentals as interest rates, rent, income and GDP. In particular, the control chart, based on per capita GDP, is introduced to identify a housing bubble.

This paper attempts to provide novel approaches and tools for the analysis and measurement of stock bubbles.

The study is based on the perspective of a generalized virtual economy and the circulation process of accumulation strengthening and exclusion in the stock noise and is based on the symmetric chain model of the evolutionary game of combination of stock markets. Based on the stable ratio of the rational and irrational investors and the asymptotically stable strategy of the model in the two cases, the paper uses the improved classic model of noise trading (DSSW) to calculate the irrational bubbles on the Shanghai stock market.

The paper shows that the more irrational investors are, the higher the irrational bubbles are.

The method exposed in the paper can be used to study the formation mechanism of the stock market bubble, to analyze the impact of investors' behaviours, to measure the size of irrational bubbles and to put forward some reasonable policy recommendations and preventive measures.

The paper succeeds in pointing out a new stock market's irrational bubble calculation model on the basis of evolutionary game chain structure, and thus measures the size of the Shanghai stock market bubble and makes some tentative research and discussion about the evolution law of the stock market's irrational bubble.

We tested for evidence of stock price bubbles in the Malaysian stock market from 1978 to 2004. Four different tests were used namely excess volatility tests, unit root/co-integration tests, duration dependence tests, and the intrinsic bubbles model. All four tests indicate that during the sample period, there was evidence of stock price bubbles. All tests results conform to the theoretical literature on asset price bubbles except for the results on the intrinsic bubbles model, which concludes that Malaysian investors under react to information on dividends. We find this result hardly surprising as anecdotal evidence does indicate that Malaysian investors place more importance on capital gains as compared to dividends. Although we do not go into a debate on whether authorities should be prick the bubble to stem its negative effects, we argue that transparent information dissemination will ensure that the stock market becomes more efficient in pricing stocks.

Speculative bubbles have been occurring periodically in local or global real-estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present chapter, we employ a recently proposed recursive unit root test in order to identify possible speculative bubbles in data from the Brazilian residential real-estate market. The empirical results show evidence for speculative price bubbles both in Rio de Janeiro and São Paulo, the two main Brazilian cities.

The purpose of this paper is to provide a decision support model for the early diagnosis of housing bubbles in the UK during the maturity process of the phenomenon.

The development process of the model is divided into four stages. These stages are driven by the normal distribution theorem coupled with the case study approach. The application of normal distribution theory is allowed through the usage of several parametric tools. The case studies tested in this research include the last two UK housing bubbles, 1986 to 1989 and 2001/2002 to 2007. The central hypothesis of the model is that during housing bubbles, all speculative activities of market participants follow an approximate synchronisation, and therefore, an irrational, synchronous and periodic increase on a wide range of relevant variables must occur to anticipate the bubble component. An empirical application of the model is conducted on UK housing market data over the period of 1983-2011.

The new approach successfully identifies the well-known UK historical bubble episodes over the period of 1983-2011. The study further determines that for uncovering housing bubbles in the UK, house price changes have the same weight with the debt–burden ratio when their velocity is positive. Finally, the application of this model has led us to conclude that the model’s outputs fluctuate approximately in line with phases of the UK real estate cycle.

This paper proposes a new measure for studying the presence of housing bubbles. This measure is not simply an ex post detection technique but dating algorithms that use data only up to the point of analysis for an on-going bubble assessment, giving an early warning diagnostic that can assist market participants and regulators in market monitoring.

The authors' paper aims to deal with the question whether speculative bubbles are present in agricultural commodity prices.

The authors apply a regime switching regression model to test the hypothesis that agricultural prices contain periodically collapsing bubbles. Using daily futures prices for six agricultural commodities, the authors calculate net convenience yields from which price fundamentals are derived.

The authors discover pronounced deviations between observed prices and their fundamental values. However, they do not find evidence for the presence of periodically and partially collapsing speculative bubbles for five of six commodities. Except for soybeans, the signs and the significance of the estimated coefficients are not entirely in line with the predictions of the theoretical model.

The authors' study adds to the heated discussion on the impact of speculative behavior on agricultural commodity prices. So far, most contributions in the literature either use theoretical arguments for the (non‐) existence of bubbles or apply indirect tests which are plagued by low statistical reliability. In contrast, the authors apply a direct test. They find that the outcome of empirical bubble tests depends on the considered bubble type and on the testing procedure. In view of these ambiguities, definite statements on the presence of speculative bubbles as well as demands for limitations of speculative positions in commodity futures markets should be carefully reconsidered.