Speculative Balloons in Borsa Istanbul Bank Stock Price: 2014-2024 Period Analysis

Abstract

Purpose – Speculative bubbles are defined as a rapid increase in the price of an asset, deviating from its fundamental value, and have been a significant topic in economic literature for a long time. This phenomenon dates back to historical periods, but it gained more attention from researchers after the 2008 global financial crisis. The purpose of this study is to identify speculative bubbles in the shares of banks traded on Turkey's stock exchange between January 2014 and March 2024, as well as the variables influencing the formation of these bubbles. The analyzed bank stocks include Akbank (AKBNK), Garanti Bankası (GARAN), İş Bankası (ISCTR), VakıfBank (VAKBN), Halkbank (HALKB), Yapı Kredi Bankası (YKBNK), and QNB Finansbank (QNBFB).
Design/methodology/approach – To detect the presence of price bubbles, the GSADF test developed by Phillips et al. (2015), which allows for the detection of multiple bubbles, was employed. The dataset covers the period from January 2014 to March 2024.
Results – During the Covid-19 pandemic and post-2022 period, numerous price bubbles formed in Turkey’s bank stocks due to economic uncertainty, liquidity abundance, low interest rates, and overly optimistic investor behavior. These bubbles typically increased market volatility, were short-lived, and burst with sudden market downturns.
Discussion – The study highlights that speculative bubbles in Turkey's bank stocks were concentrated particularly during the Covid-19 pandemic and the post-2022 period due to market dynamics, investor behavior, and macroeconomic conditions. The findings emphasize that these bubbles amplified market volatility and that irrational investor behavior led to significant market fluctuations.