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Analysis of Price Bubbles in Borsa Istanbul (BIST) Liquid Banking Sector Stock Market

Author

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  • Topcu Murat

    (Department of Customs Business, Istanbul Gelisim University, Istanbul, Türkiye)

Abstract

The study investigates the stock price bubbles of the liquid banking sector index (XLBNK) and its six constituent banks in the BIST primary sector. Price bubbles are one of the important factors that trigger financial crises. Detection of bubbles in the financial sector serves as a warning for preventing crises and developing preventive policies. The GSADF test method developed by Phillips, Shi & Yu (2015) is used to analyze bubbles. The results show that there has been a structural break in the value of the Turkish XLBNK index and its component stocks since the last quarter of 2021, and more than one bubble has formed. However, there is no statistical evidence of a bubble in the share values of Halk Bank, a component of the XLBNK index. Regarding bubble formation, the structural break in the XLBNK index and shares since the last quarter of 2021 reflects the inconsistency and structural breaks in Turkey’s macroeconomic indicators and monetary policy. The observed bubbles in the share pricing of the XLBNK index and its component banks continued to persist in the third quarter of 2024 when the study was conducted. The revelation that bubbles persist in the current situation contributes to the convergence of asset prices to intrinsic prices through investor decisions, the consistent formation of asset pricing, and the effective functioning of the markets. Regarding portfolio management, the results can be used in making profit realization decisions by removing persistent stocks from the portfolio, reducing portfolio risk, and supporting investment decisions.

Suggested Citation

  • Topcu Murat, 2025. "Analysis of Price Bubbles in Borsa Istanbul (BIST) Liquid Banking Sector Stock Market," Economics, Sciendo, vol. 13(2), pages 305-331.
    • Handle: RePEc:vrs:econom:v:13:y:2025:i:2:p:305-331:n:1013
    DOI: 10.2478/eoik-2025-0040
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    References listed on IDEAS

    as
    1. Brunnermeier, Markus K. & Oehmke, Martin, 2013. "Bubbles, Financial Crises, and Systemic Risk," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1221-1288, Elsevier.
    2. Husam RJOUB & Irfan CIVCIR & Nil Gunsel RESATOGLU, 2017. "Micro and Macroeconomic Determinants of Stock Prices: The Case of Turkish Banking Sector," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 150-166, March.
    3. Phillips, Peter C.B. & Magdalinos, Tassos, 2007. "Limit theory for moderate deviations from a unit root," Journal of Econometrics, Elsevier, vol. 136(1), pages 115-130, January.
    4. repec:pri:metric:wp047_2012_brunnermeier_ssrn-id2103814.pdf is not listed on IDEAS
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    More about this item

    Keywords

    Price bubbles; Stock price bubbles; BIST Liquid Banking sector; GSADF test;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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