INVESTIGATION OF RATIONAL BUBBLES AND VOLATILITY SPILLOVERS IN COMMODITY MARKETS: EVIDENCES FROM PRECIOUS METALS

Price bubbles which can be expressed as the deviation of the price of an asset from its fundamental value, have significant impacts on markets. The effects of the financial crisis that started with the burst of the housing bubbles in the USA in 2008 have spread all over the world and turned into a global crisis. In this study, the price bubbles of gold, silver, platinum and palladium in the commodity markets for the period between 01.01.2010-19.02.2019 were investigated. RtADF, SADF and GSADF methods were used to determine the formation and burst periods of price bubbles. As a result of the analysis, price bubbles were found in gold, silver and platinum, whereas no bubbles were found in palladium prices. Due to the close formation dates of these bubbles, whether there was any return or volatility spillover between gold, silver and platinum markets was investigated with VAR-EGARCH method. As a result of the study, it was found that there was a multiple spillover between the gold, silver and platinum returns. Thus, it was concluded that the price bubbles formed in precious metals triggered each other. Findings regarding the presence of price bubbles in the precious metal markets are crucial for traders in terms of trading timing. However, the findings related to the volatility spillover among precious metals are also important in terms of considering the effect of this spillover for the investors who provide hedging by precious metals.