Vol. 9 No. 4 (2021): Business & Management Studies: An International Journal

An empirical comparison of stock market bubbles

Özge Korkmaz
Assoc. Prof. Dr., Malatya Turgut Özal University, Malatya, Turkey
Bilgin Bari
Assist. Prof. Dr., Anadolu University, Eskişehir, Turkey
Zafer Adalı
Res. Assist., Artvin Çoruh University, Artvin-Hopa, Turkey

Published 2021-12-25

How to Cite

Korkmaz, Özge, Bari, B., & Adalı, Z. (2021). An empirical comparison of stock market bubbles. Business & Management Studies: An International Journal, 9(4), 1286–1299. https://doi.org/10.15295/bmij.v9i4.1889


Financial asset bubbles occur due to systematic and continuous differences between fundamental and market values. Due to high growth periods and foreign capital inflows, bubbles are also seen in stock market indexes, especially in emerging market economies. This study analyzes the existence of bubbles in BIST100, IDX COMPOSITE, BOVESPA, MDEX, NIFTY 50, SHANGAI, and S&P 500 stock markets for the period 2009:01-2021:06.  RADF, SADF, and GSADF tests are applied to detect bubbles on stock market closing prices. In addition, the emergence and demise dates of the bubbles are determined by employing the date-stamping method. The GSADF test gives more effective results and determines bubbles with different durations in all stock markets, except the S&P 500. The results reveal that the most inefficient market is IDX COMPOSITE, and S&P 500is the most efficient market. The analysis includes the S&P 500, the world's most liquid and most prominent stock market, for comparison. In this respect, bubbles occur more in emerging market exchanges. The findings also confirm the validity of the rational bubble law.


Download data is not yet available.


  1. Almudhaf, F. (2018). Predictability, Price Bubbles, and Efficiency in the Indonesian Stock-Market. Bulletin of Indonesian Economic Studies, 54:1, 113-124.
  2. Afsar, K. E. & Kisava, Z. S. (2018). The analysis of bubbles and crashes on financial markets for emerging economies: Evidenced From BRICS. Turkish Economic Review, 5(1), 1-11.
  3. Ahmed, E., Rosser Jr, J. B., & Uppal, J. Y. (2010). Emerging markets and stock market bubbles: Nonlinear speculation?. Emerging Markets Finance and Trade, 46(4), 23-40.
  4. Al-Anaswah, N. & Wilfling, B. (2011). Identification of Speculative Bubbles Using State-Space Models with Markov-Switching. Journal of Banking & Finance, 35, 1073-1086.
  5. Aliber, R. Z., & Kindleberger, C. P. (2011). Manias, panics, and crashes: A history of financial crises. New York: Palgrave Macmillan.
  6. Arshanapalli, B., & Nelson, W. B. (2016). Testing for stock price bubbles: a review of econometric tools. The International Journal of Business and Finance Research, 10(4), 29-42.
  7. Bago, J. L., Souratié, W. M., Ouédraogo, M., Ouédraogo, E., & Dembélé, A. (2019). Financial Bubbles: New Evidence from South Africa’s Stock Market. MPRA Paper 95685, University Library of Munich, Germany.
  8. Blanchard, O, J. & Watson, W. (1982). Bubbles, Rational Expectations and Financial Markets. Crises in the Economic and Financial Structure, Paul Wachtel, editor, 295-316.
  9. Boucher, C. (2003). Testing for rational bubbles with time varying risk premium and nonlinear cointegration: evidence from the US and French stock markets. Research Paper, France: Universite Paris-Nord. Doi:
  10. Bozoklu, S., & Zeren, F. (2013). Türkiye Hisse Senedi Piyasasinda Rasyonel Köpükler: Sakli Eş Bütünleşme Yaklaşimi. Finansal Araştırmalar ve Çalışmalar Dergisi, 5(9), 17-31.
  11. Brooks, C. & Katsaris, A. (2003). Rational speculative bubbles: an empirical investigation of the London Stock Exchange. Bulletin of Economic Research, 55(4), 319-346.
  12. Cagli, E. Ç. & Mandacı, P.E. (2017). Borsa İstanbul’da Rasyonel Balon Varlığı: Sektör Endeksleri Üzerine BirAnaliz. Finans Politik ve Ekonomik Yorumlar, (629), 63-76.
  13. Calverley, John (2004). Bubbles and How to Survive Them. Nicholas Brealey Publishing, Finland.
  14. Chan, K., McQueen, G., & Thorley, S. (1998). Are there rational speculative bubbles in Asian stock markets?. Pacific-Basin Finance Journal, 6(1-2), 125-151.
  15. Chang, T. & Cai, Y. (2016). Do Bubbles exist in Chinese Share Markets?. International Review of Accounting, Banking & Finance, Vol 8, No. 2/3/4, Summer/Fall/Winter, 43- 54.
  16. Chang, T. & Gupta, R. (2014). Testing for multiple bubbles in the BRICS stock markets. University of Pretoria Department of Economics Working Paper Series, 7.
  17. Chang, T., Gil-Alana, L., Goodness C. A., Gupta, R., & Ranjbar, O. (2016). Testing for bubbles in the BRICS stock markets. Journal of Economic Studies, 43(4), 646-660.
  18. Chen, Y.H. & Quan, L. (2013). Rational speculative bubbles in the Asian stock markets: Tests on deterministic explosive bubbles and stochastic explosive root bubbles. Journal of Asset Management, 14(3), 195-208.
  19. Citak, F. (2019). An empirical investigation of bubble in the Turkish Stock Market. International Journal of Economics and Innovation, 5(2), 247-262.
  20. Diba, B. T. & Grossman, H. I. (1985). Rational bubbles in stock prices?. National bureau of economic research, No. w1779.
  21. Diba, B. T. & Grossman, H. I. (1988). Explosive rational bubbles in stock prices?. The American Economic Review, 78(3), 520-530.
  22. Dwyer, G. P. & Hafer, R. W. (2013). The stock market: Bubbles, volatility, and chaos. Proceedings of the Thirteenth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis Springer Science & Business Media.
  23. Escobari, D., Garcia, S., & Mellado, C. (2017). Identifying bubbles in Latin American equity markets: Phillips-Perron-based tests and linkages. Emerging Markets Review, 33, 90-101.
  24. Harvey, D. I., Leybourne, S.J., & R. Sollis. (2013). Recursive right-tailed unit root tests for an explosive asset price bubble. Newcastle Univeristy ePrints.
  25. Harvey, D. I., Leybourne, S. J., & Whitehouse, E.J. (2020). Date-stamping multiple bubble regimes. Journal of Empirical Finance, 58, 226-246.
  26. Homm, U. & Breitung, J. (2012). Testing for speculative bubbles in stock markets: a comparison of alternative methods. Journal of Financial Econometrics, 10(1), 198-231.
  27. Jahan-Parvar, M. R., & Waters, G. A. (2010). Equity price bubbles in the Middle Eastern and North African financial markets. Emerging Markets Review, 11(1), 39-48.
  28. Junttila, J. (2003). Detecting speculative bubbles in an IT-intensive stock market. Journal of Economics and Finance, 27(2), 166-189.
  29. Kilic, Y. (2020). Finansal Piyasalarda Balon Varlığının Test Edilmesi: BRICS-T Ülkeleri Örneği. Bankacılık ve Sermaye Piyasası Araştırmaları Dergisi, 4(9), 11-22.
  30. Kindleberger, C, P. (1991). The Economic Crisis of 1619 to 1623. The Journal of Economic History, 51, (1), 149-175.
  31. Kirkpinar, A., Erer, E., & Erer, D. (2019). Is There a Rational Bubble in BIST 100 and Sector Indices?. Financial Studies, 23(3), 21-33.
  32. Korkmaz, Ö., Erer, D., & Erer, E. (2016). Alternatif Yatırım Araçlarında Ortaya Çıkan Balonlar Türkiye Hisse Senedi Piyasasını Etkiliyor mu? BİST 100 Üzerine Bir Uygulama. BDDK Bankacılık ve Finansal Piyasalar Dergisi, 10 (2), 29-61.
  33. Korkos, I. (2014), Detecting bubbles in asset price: an empirical investigation in the US stock exchange market A Thesis Submitted for The Degree of Master ff Science (Msc) in Banking & Finance, Atina: School of Economics, Business Administration & Legal Studies.
  34. Liaqat, A., Nazir, M. S., & Ahmad, I. (2019). Identification of multiple stock bubbles in an emerging market: application of GSADF approach. Economic Change and Restructuring, 52(3), 301-326.
  35. Lucas Jr, R. E. (1978). Asset prices in an exchange economy. Econometrica: Journal of the Econometric Society, 1429-1445.
  36. Ogut, H., Doğanay, M. M., & Aktaş, R. (2009). Detecting stock-price manipulation in an emerging market: The case of Turkey. Expert Systems with Applications, 36(9), 11944-11949.
  37. Philips, P.C.B., Wu, Y. & Yu, J. (2011). Explosive Behavior In The 1990s NASDAQ: When Did Exuberance Escalate Asset Values?. International Economic Review, 52(1), 221-226.
  38. Philips, P.C.B., Shi, S. & Yu, J. (2013). Testing For Multiple Bubbles: Historical Epısodes of Exuberance and Collapse in The S&P 500. Cowles Foundation Discussion Paper No. 1914.
  39. Philips, P.C.B., Shi, S. & Yu, J. (2014). Specification Sensitivity in Right-Tailed Unit Root Testing for Explosive Behavior. Oxford Bulletin of Economics and Statistics, 76(3), 315-333.
  40. Reza, B. S. M. (2010). Literatures about asset price bubbles and monetary policies. In Proceedings of international conference on applied economics, 695-703.
  41. Salge, M. (2012). Rational bubbles: theoretical basis, economic relevance, and empirical evidence with a special emphasis on the German stock market. Part of the Lecture Notes in Economics and Mathematical Systems book series, Vol. 451, Springer Science & Business Media.
  42. Santoni, G.J. (1987). The great bull markets 1924-29 and 1982-87: speculative bubbles or economic fundamentals?. Federal Reserve Bank of St. Louis Review, 69(9), 16-29.
  43. Shiller, R. (1981). Do stock prices move too much to be justified by subsequent changes in dividends?. American Economic Review, 71: 421-436.
  44. Szulczyk, K., Cheema, M. A., & Holmes, M. J. (2018). Rational Speculative Bubbles: Evidence from Asian Stock Markets. https://ssrn.com/abstract=3096400 /Date of access: 27.07.2021)
  45. Tasci, H. M., & Okuyan, H. A. (2009). IMKB’de Spekülatif Şişkinliklerin Test Edilmesi. Doğuş Üniversitesi Dergisi, 10(2), 272-283.
  46. Yanik, S., & Aytürk, Y. (2011). Rational speculative bubbles in Istanbul stock exchange. Muhasebe ve Finansman Dergisi, (51), 175-190.
  47. Yu, J. S., & Hassan, M. K. (2010). Rational speculative bubbles in MENA stock markets. Studies in Economics and Finance, 27(3), 247-264.
  48. Yuhn, K. H., Kim, S. B., & Nam, J. H. (2015). Bubbles and the Weibull distribution: was there an explosive bubble in US stock prices before the global economic crisis?. Applied Economics, 47(3), 255-271.
  49. Zeren F. and Yilanci V. (2019). Are there Multiple Bubbles in the Stock Markets? Further Evidence from Selected Countries. Ekonomika, 98(1), pp. 81-95.