2007): “Explosive behavior in the 1990s Nasdaq: When did exuberance escalate asset values?,” Cowles Foundation for Research in

A recursive test procedure is suggested that provides a mechanism for testing explosive behavior, date-stamping the origination and collapse of economic exuberance, and providing valid con\u85dence intervals for explosive growth rates. The method involves the recursive im-plementation of a right-side unit root test and a sup test, both of which are easy to use in practical applications, and some new limit theory for mildly explosive processes. The test procedure is shown to have discriminatory power in detecting periodically collapsing bubbles, thereby overcoming a weakness in earlier applications of unit root tests for economic bubbles. An empirical application to Nasdaq stock price index in the 1990s provides con\u85rmation of ex-plosiveness and date-stamps the origination of \u85nancial exuberance to mid-1995, prior to the famous remark in December 1996 by Alan Greenspan about irrational exuberance in \u85nancia