Fundamental indicators, bubbles in stock returns and investor sentiment

This paper uses the stock performance of construction companies in Taiwan to test whether there are bubbles. The panel data tests are employed to find whether the prices of construction company stocks reflect fundamental indicators and to detect the bubble-like behavior of the stock prices. A bubble indicator is constructed and its relationship with investor sentiment is also discussed. The empirical finding shows that sentiment of foreign investors was the most likely to be related to bubbles in the sample period. This evidence also provides the implication for policy enactment of government.