Asset Price Bubbles with Specific Focus on Stock Prices in Pakistan

This research paper is an attempt to investigate Asset Price Bubbles (APB) with reference to Pakistan stock market. The analysis of time series graph shows a linear trend in CPI and M2I whereas a nonlinear trend in stock prices. Moreover, the graph also shows an unequal spread in both the stock prices which indicate Heteroskedasticity. Then, descriptive statistics test shows high Standard Deviations for stock prices compared with CPI and M2I which indicates a higher volatility in stock prices. Finally, hypothesis test for equality of variance concluded the presence of Asset Price Bubbles by rejecting null hypothesis of equal volatility against the alternative hypothesis of greater volatility in stock prices