Testing of Financial Time Series for Bubbles

The research aims to analyze methods of bubble detection in order to figure out whether there is a bubble in the American stock market. To answer the question, we employ a new approach developed by Phillips et al. (2015) which provides the consistent date-stamping procedure for multiple bubbles in time series including an explosive behavior of prices. The hypotheses were tested with data covering inflation adjusted monthly prices of stock indices in the period of 2002-2018. Our empirical results indicate the preliminary evidence for a bubble in the Dow Jones Index that emerged in October 2017. Moreover, this bubble became the first for the American market since the mortgage crisis of 2007-2008. As a result, this finding has important economic and policy implications because of possible threats of the bubble presence.