Title: Rational speculative bubbles in the stock market - the case of Amman Stock Exchange

Authors: Usama Adnan Fendi; Bassam Mohammad Maali; Muhannad Ahamd Atmeh

Addresses: Risk Management Department, American University of Madaba, Jordan ' International Accounting Department, German Jordanian University, Jordan ' International Accounting Department, German Jordanian University, Jordan

Abstract: This paper aims at inspecting the existence of rational speculative bubbles in the Amman Stock Exchange market (ASE) along two sample periods, the first from 2004 to 2009, and the second from 2010 to 2018. The paper uses three different quantitative approaches to analyse the returns for ASE index over the selected sample periods. The first approach is the descriptive statistics, the second one is the explosiveness test approach, and the third one is the duration dependence test approach. The paper found evidence for the existence of a rational speculative bubble in ASE returns for the first sample period inspected and based on the three different approaches. This paper represents a contribution toward establishing an effective early warning system for predicting and mitigating financial crises. The paper represents a good contribution to improve the investment environment in Jordan.

Keywords: rational speculative bubble; duration dependence test; Amman Stock Exchange; ASE; explosiveness test.

DOI: 10.1504/AAJFA.2023.128616

Afro-Asian Journal of Finance and Accounting, 2023 Vol.13 No.1, pp.68 - 84

Received: 20 Dec 2019
Accepted: 10 Jul 2020
Published online: 31 Jan 2023 *