Several puzzling aspects of the behavior of United States stock prices can be explained by the presence of a specific type of rational bubble that depends exclusively on dividends.
We call such bubbles "intrinsic" bubbles because they derive all of their variability from
exogenous economic fundamentals, and none from extraneous factors. Unlike the most
popular examples of rational bubbles, intrinsic bubbles provide an empirically plausible
account of deviations from present-value pricing. Their explanatory potential comes partly
from their ability to generate persistent deviations that appear relatively stable over long
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