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It is well known that bubbles possess the potential to increase economic welfare due to a reduction of capital … for deterministic bubbles in a stochastic economy. Second, a simulation shows that although bubbles are unable to persist …
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We estimate various SVAR models for the US in order to assess the importance of fundamental shocks in explaining stock price movements. The results show that models using real activity variables place more weight on fundamental shocks than models using dividends or earnings. However, according...
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