TY  - JOUR
AU  - Flood,Robert P.
AU  - Hodrick,Robert J.
AU  - Kaplan,Paul
TI  - An Evaluation of Recent Evidence on Stock Market Bubbles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1971
PY  - 1986
Y2  - July 1986
UR  - http://www.nber.org/papers/w1971
L1  - http://www.nber.org/papers/w1971.pdf
N1  - Author contact info:
Robert Flood
Notre Dame
E-Mail: rflood1@nd.edu

Robert J. Hodrick
Graduate School of Business
Columbia University
3022 Broadway
New York, NY 10027
Tel: 212/854-3413
Fax: 212/316-9219
E-Mail: rh169@columbia.edu
AB  - Several recent studies have attributed a large part of asset price volatility to self-fulfilling expectations. Such an explanation is unattractive to many since it allows allocations that need bear no particular relation to those implied by the economist's standard kit of
market fundamentals. We examine the evidence presented in some of these
studies and find (i) that all of the bubble evidence can equally well be
interpreted as evidence of model misspecification and (ii) that a slight extension of standard econometric methods points very strongly toward model misspecification as the actual reason for the failure of simple models of market fundamentals to explain asset price volatility.
ER  -