General-Purpose Technology and Speculative Bubble Detection
Abstract
We show that the leading bubble test suffers severe size distortion when fundamentals incorporate general-purpose technology adoption. Embedding a hump-shaped technology shock in the Campbell-Shiller present-value model, we prove that the fundamental price becomes locally explosive during adoption, contaminating the test's limit distribution with a non-centrality parameter proportional to the shock's peak. We propose a fundamental-versus-speculative decomposition that projects prices onto observable technology proxies and applies the test to the residual. Empirically, the decomposition eliminates evidence of speculation in the 2020-2025 AI rally while confirming a speculative peak confined to December 1999-March 2000 in the dot-com episode.
Cite
@article{arxiv.2604.25826,
title = {General-Purpose Technology and Speculative Bubble Detection},
author = {Haiqiang Chen and Li Chen and Difang Huang and Yuexin Li and Zhengjun Zhang},
journal= {arXiv preprint arXiv:2604.25826},
year = {2026}
}