Do Bubbles Spill Over? Estimating Financial Bubbles in Emerging Markets

Ozan Hatipoglu and Onur Uyar

Emerging Markets Finance and Trade, 2012, vol. 48, issue S5, 64-75

Abstract: The 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.

Keywords: emerging markets; financial bubbles; sigma-point Kalman filter (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Working Paper: Do Bubbles Spill Over? Estimating Financial Bubbles in Emerging Markets (2011)
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