SMU Keppel Professor of Financial Economics and Yale University Sterling Professor Peter CB Phillips and SMU Professor of Economics and Finance Jun Yu co-wrote a commentary on whether global stock markets are heading towards bubbles or roller coaster. They found no evidence of bubbles in the STI (or the S&P 500 or Dow Jones or FTSE 100) from August 2011 to June 2013 nor in US Treasuries or bond prices. These results together imply that economic columnist Paul Krugman’s assessment last month was correct and his advice to Federal Reserve Chairman Ben Bernanke is well supported by the evidence on prices even without reference to economic fundamentals.
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