Asset Price Bubbles In Incomplete Markets

This paper describes the asset price bubbles in the incomplete markets with lo-cal martingale approach, as well as the character of asset price bubbles in static anddynamic market. Asset price bubbles are the difference between the market price andthe fundamental price, on the basis of which, several testing methods of asset pricebubbles are proposed in this paper, including statistical testing methods and testingmethods through the volatility model. When testing bubbles by ARCH model andGARCH model, density estimation is adopted in this paper. Using the model defini-tion of asset price bubbles and testing methods, the paper brings forward the definitionof housing price bubbles and testing methods of housing price bubbles.