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

Topcu Murat ()
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Topcu Murat: Department of Customs Business, Istanbul Gelisim University, Istanbul, Türkiye

Economics, 2025, vol. 13, issue 2, 305-331

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.

Keywords: Price bubbles; Stock price bubbles; BIST Liquid Banking sector; GSADF test (search for similar items in EconPapers)
JEL-codes: C22 G12 G17 R31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:econom:v:13:y:2025:i:2:p:305-331:n:1013

DOI: 10.2478/eoik-2025-0040

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