Rational bubbles in stocks can cause increases in trading volume, even after accounting for their expansionary effect on output and consumption. Trading volume increases are not caused by speculation driven by differences in beliefs. Dividend-bearing assets used to transfer resources...

A nonstationary dividend yield, having a unit root, is seen as proof of bubbles (Craine 1993). This inference is not valid. A sufficient condition for the absence, respectively presence of bubbles is the uniform divergence, respectively uniform convergence of the dividend yield series. I use...

Empirical tests for bubbles typically focus on the stationarity properties of the dividend yield. Evidence of nonstationarity in the dividend yield is viewed as proof of bubbles, while stationarity is interpreted as absence of bubbles. For economies with arbitrary pricing kernels but stationary...

We show how product variety affects asset prices in a general-equilibrium model. We analytically characterize the unique equilibrium and estimate the model to match asset pricing and product market moments. The equity premium and risk-free rate can be reconciled for risk aversion levels around 4...

I propose an arbitrage-based theory of bubbles in economies with general portfolio constraints and differences in beliefs. I find that, in general, bubbles cannot exist unless the constraints restrict the demand for credit sufficiently to induce low interest rates. Speculation due to...