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    Duration dependence test of rational speculative bubbles: a case study of Hong Kong stock market

    Dou, Ling Ling
    Abstract
    This study tests the presence of rational speculative bubbles in the Hong Kong stock market over a sample period from 1993-2008. Two sets of bubble attributes are examined, including traditional diagnostics for autocorrelation, skewness and kurtosis and duration dependence test using the Log-logistic hazard model and the Weibull hazard model. Using abnormal monthly and weekly real returns of individual stocks listed on Hong Kong stock exchange, the results suggest that the Hong Kong stock market is not subject to rational speculative bubbles in before (1993-1997) and after (1998-2008) the 1997 Asian financial crisis. The evidence of skewness, autocorrelation and leptokurtosis is consistent with the presence of rational speculative bubbles. In contrast, tests for duration dependence show no evidence of duration dependence, indicating that the Hong Kong stock market is not affected by rational speculative bubbles. The results also suggest that the tests are not sensitive to the choice of different models, monthly versus weekly runs of returns and equally- versus value- weighted portfolios in the Hong Kong stock market. The results of this study imply that the stock prices could be the reflection of the “fundamentals”, but not “irrational” behavior of the investors in the Hong Kong stock market.... [Show full abstract]
    Keywords
    duration dependence test; speculative bubbles; stock markets
    Date
    2010
    Type
    Thesis
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    • Department of Financial and Business Systems [526]
    • Masters Theses [847]
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