The frequent emergence of bubbles in a short time indicates that China’s stock market is still emerging market.
These bubbles are liquidity-driven and presuppose a loose credit cycle, with the exception of bubbles in 2014–2015. Empirical results show that there are 8 bubbles in the Main-Board Market, 6 bubbles in the Small and Medium Enterprises Board (SMEs), and 4 bubbles in the Growth Enterprise Market (GEM). Unlike the other researches in China, the ratios of the real stock prices’ natural logarithm to the real dividends’ natural logarithm are used for our testing instead of stock price index. Based on the financial present value model, this paper applies right-tail recursive ADF test to test multiple bubbles in China’s multi-level stock market. The generalized sup ADF (GSADF) and backward sup ADF (BSADF) tests with flexible window width can effectively detect and date periodically collapsing bubbles in real time. Understanding bubble phenomenon and dating the period of bubbles in real time can provide an early warning diagnosis for financial bubbles and help regulatory authorities to control it and maintain market order. Financial bubbles have always been a topic of long-term concern for economists.
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