Equity market anomalies: the case of speculative bubbles.

Summary The purpose of this research is to test the existence of rational bubbles in financial markets, and to develop a bubble testing procedure. The first four chapters examine the theory of bubbles, based on the notion of fundamental value, and retain only rational bubbles for the research framework. Chapters five to seven analyze possible econometric testing techniques to define a detection approach: volatility, cointegration, or regression tests. The previous tests are extended to a longer period on the US index, and their results are not questioned: bubbles are not rejected from the US market. Chapter 8 proposes to incorporate the fluctuation of discount rates in the tests: this element does not seem to explain the results on bubbles. In chapter 9, the proposed procedure is applied to the French market index over the same period, 1871 - 1997. The results are different: they do not detect a bubble in France.