Periodically collapsing Evans bubbles and stock-price volatility
Rotermann Benedikt; Wilfling Bernd
Working paperAbstract
This paper analyzes conditional stock-price volatility within in present-value framework including (rational) periodically collapsing bubbles as introduced by Evans (1991). To this end, we derive an analytically closed-form volatility formula of the stock price. The formula establishes a direct link between the bubble component and stock-price volatility. Using a Bayesian Monte-Carlo estimation technique (the particle filter), we demonstrate how to fit the parametric volatility equation to stock-market data.
Details about the publication
Place of publication: University of Muenster
Title of series: CQE Working Paper
Volume of series: 28/2013
Status: Published
Release year: 2013
Language in which the publication is written: English
Keywords: Present-value model; Evans bubbles; conditional volatility; particle-filter estimation
Authors from the University of Münster
| Rotermann, Benedikt | |
| Wilfling, Bernd |