Test About Periodically Explosive Bubbles In Chinese Stock Market

The stock market bubble refers to the sharp rise in stock prices, resulting in stock market prices seriously deviate from its intrinsic value. At this time, the market is highly speculative, and Greater Fool appears. Bubble has linkage effects, which means the produces of bubble, will invariably lead to economic development and prosperity, and the bubble burst will trigger the financial or economic crisis. That is, the level and nature of bubble play an important role in the healthy operation of stock market and entire national economy. Therefore, it is necessary to make a research on the stock market bubble, locate the causes of bubble and seek for appropriate measures to control the level of stock market bubble.Based on economists'different definitions on the stock market bubble, this paper summarizes the characteristics of stock market bubble, and then introduces a classification of the stock market bubble, including rational bubble, irrational bubble and informative bubble. After that, this paper presents several ways to test the stock market bubble. At present, there are many studies on stock market rational bubble in our country, but the majority used indirect testing method to test stock market bubble, the direct testing method is little involved. Yet this paper uses the direct method to test the periodically collapsing bubbles in stock market. Based on Evan's Periodically Collapsing Bubbles model, this paper uses monthly closing prices from January 1996 to December 2008 in the Shanghai Composite Index as a sample, and makes a empirically test adopting threshold autoregressive, momentum threshold autoregressive. Test results show that, Shanghai Composite Index on monthly changes in the excess rate of return can be divided into two status: the bubble exists and the bubble does not exist, and these two status alternate. This indicates that periodically collapsing speculative bubbles exists in our country's stock market. Then on the basis of empirical research on bubble's existence, we discuss the causes of pricing bubbles in our country's stock market, show its effect to economy, and propose the corresponding preventing and controlling measures.