The observable implications of self-fulfilling expectations

James D. Hamilton, Charles H. Whiteman

Research output: Contribution to journalArticlepeer-review

135 Scopus citations


Under a modest generalization of the dynamics permitted for variables which are seen by agents but not the econometrician, many of the existing tests for the presence of speculative bubbles are not statistically valid. Less restrictive tests lead us to concur with Flood and Garber that speculative bubbles were not part of the German hyperinflation, but dispute Shiller's conclusion that stock prices are excessively volatile. Moreover, all such tests are subject to the admonition that what appears to be a speculative bubble could instead have arisen from rational agents responding solely to economic fundamentals not observed by the econometrician.

Original languageEnglish (US)
Pages (from-to)353-373
Number of pages21
JournalJournal of Monetary Economics
Issue number3
StatePublished - Nov 1985

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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