This paper provides an early warning indicator for bubbles in financial markets. The indicator is based on traditional … consensus bubbles and gives warning signals well ahead of the crash, in most cases as early as 12 months ahead. The indicator … also signals most of the 'negative bubbles' before their turning points …

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 risk-free rates, I show that there exist bubbles that are strictly …