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Bubble contagion: Evidence from Japan’s asset price bubble of the 1980-90s

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  • Hu, Yang
  • Oxley, Les
Abstract
This paper investigates the most documented asset price bubbles of the 1980-90s in Japan, and subjects them to the rigours of recent econometric tests. We focus on testing for bubbles in Japan’s stock and real estate markets from 1970Q1 to 1999Q4 using the right-tailed unit root test of Phillips et al. (2015a, PSY). We also utilize the econometric methods of Greenaway-McGrevy and Phillips (2016) to explore the possibility of contagion between these two markets. The paper offers significant econometric-based evidence of bubbles in both markets during this period in Japan and more importantly, for the first time in the literature, formal tests of bubble contagion from Japan’s stock market to its real estate market. Our findings may help to understand why Japan’s real estate bubble collapsed after the stock price bubble, as the bubble-like behaviour from the stock market migrates to the real estate market.

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  • Hu, Yang & Oxley, Les, 2018. "Bubble contagion: Evidence from Japan’s asset price bubble of the 1980-90s," Journal of the Japanese and International Economies, Elsevier, vol. 50(C), pages 89-95.
    • Handle: RePEc:eee:jjieco:v:50:y:2018:i:c:p:89-95
    DOI: 10.1016/j.jjie.2018.09.002
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    2. Shuping Shi & Peter C.B. Phillips, 2023. "Diagnosing housing fever with an econometric thermometer," Journal of Economic Surveys, Wiley Blackwell, vol. 37(1), pages 159-186, February.
    3. Potrykus, Marcin, 2023. "Price bubbles in commodity market – A single time series and panel data analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 110-117.
    4. Bago, Jean-Louis & Souratié, Wamadini M. & Ouédraogo, Moussa & Ouédraogo, Ernest & Dembélé, Alou, 2019. "Financial Bubbles : New Evidence from South Africa’s Stock Market," MPRA Paper 95685, University Library of Munich, Germany.
    5. Theodosios Perifanis, 2019. "Detecting West Texas Intermediate (WTI) Prices’ Bubble Periods," Energies, MDPI, vol. 12(14), pages 1-16, July.

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    More about this item

    Keywords

    Japanese asset price bubble; Contagion; Stock market; Real estate market;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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