Testing for explosive bubbles: a review

TL;DR

This paper reviews various methods for detecting explosive bubbles in time series data, focusing on recent developments, dating techniques, and the impact of time-varying volatility on testing accuracy.

Contribution

It provides a comprehensive overview of current testing methods for explosive bubbles, including approaches for dating regimes and handling volatility, highlighting recent advances in the field.

Findings

Summarizes recent testing methods for explosive bubbles.

Discusses techniques for dating bubble regimes.

Examines effects of time-varying volatility on tests.

Abstract

This review discusses methods of testing for explosive bubbles in time series. A large number of recently developed testing methods under various assumptions about innovation of errors are covered. The review also considers the methods for dating explosive (bubble) regimes. Special attention is devoted to time-varying volatility in the errors. Moreover, the modelling of possible relationships between time series with explosive regimes is discussed.