It is customary to assume that an indicator of a latent variable is driven by the latent variable and some random noise. In contrast, a background indicator is also systematically influenced by variables outside the structural model of interest. Background indicators deserve attention because in...

The work of Haugen and Baker (1991) and Grinold (1992) has shown that market capitalisation-weighted indices are not mean-variance efficient. Further research by Amenc, Goltz, and Le Sourd (2006) proves that even naïve equal weighting can offer a better risk to return trade-off to investors in...

The aim of this paper is to present novel tests for the early causal diagnostic of positive and negative bubbles in the S&P 500 index and the detection of End-of-Bubble signals with their corresponding confidence levels. We use monthly S&P 500 data covering the period from August 1791 to August...