Do Bubbles Spill Over? Estimating Financial Bubbles in Emerging Markets
AbstractThe close correlation among the stock price indices of a relatively large number of developed and emerging markets indicates that bubbles might spill over from one country to another. To test for such spillover effects, we estimate the bubble component of price changes using a nonlinear, structural, state-space model with time-variable parameters. We apply directionality tests to bubbles formed in the United States and Turkey. We find that bubbles originating in the United States lead to bubbles in Turkey. We provide empirical evidence on bubbles formed during the major financial crises of the past two decades in Turkey and the past century in the United States. Despite the improvement in fundamentals and overall economic performance, we find the Turkish asset market is still subject to volatile financial bubbles that might stem from abroad.
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Bibliographic InfoPaper provided by Bogazici University, Department of Economics in its series Working Papers with number 2011/06.
Date of creation: Jun 2011
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Other versions of this item:
- Ozan Hatipoglu & Onur Uyar, 2012. "Do Bubbles Spill Over? Estimating Financial Bubbles in Emerging Markets," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(S5), pages 64-75, November.
- NEP-ALL-2012-01-18 (All new papers)
- NEP-ARA-2012-01-18 (MENA - Middle East & North Africa)
- NEP-CWA-2012-01-18 (Central & Western Asia)
- NEP-FMK-2012-01-18 (Financial Markets)
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