Discussion Paper
A Panel Clustering Approach to Analyzing Bubble Behavior
This study provides new mechanisms for identifying and estimating explosive bubbles in mixed-root panel autoregressions with a latent group structure. A post-clustering approach is employed that combines a recursive k-means clustering algorithm with panel-data test statistics for testing the presence of explosive roots in time series trajectories. Uniform consistency of the k-means clustering algorithm is established, showing that the post-clustering estimate is asymptotically equivalent to the oracle counterpart that uses the true group identities.