Recent years have witnessed a tremendous boom at the Pakistani equity market followed by a sudden meltdown. By employing the univariate time series analysis and duration dependence test (DDT) (McQueen and Thorley, 1994) over the weekly return data of KSE-100 index for the period from 1999 to 2008 this study investigates whether this boom was fundamentally driven or steered by rational speculative bubbles. All 3 tests - ADF, PP and KPSS - characterize the returns' series to be of I(1). The returns' distribution of KSE-100 index is negatively skewed, leptokurtic and non-normal as reflected by the significant Jarque-Bera statistics. The results of DDT also support the presence of rational speculative bubbles in both the log-logistic and the Weibull hazard models.
