Analysis of bubbles and crashes in the TRY/USD, TRY/EUR, TRY/JPY and TRY/CHF exchange rate within the scope of econophysics


DEVİREN B., Kocakaplan Y., KESKİN M., Balcilar M., Ozdemir Z. A. , Ersoy E.

PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS, vol.410, pp.414-420, 2014 (Journal Indexed in SCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 410
  • Publication Date: 2014
  • Doi Number: 10.1016/j.physa.2014.05.029
  • Title of Journal : PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
  • Page Numbers: pp.414-420

Abstract

In this study, we analyze the Turkish Lira/US Dollar (TRY/USD), Turkish Lira/Euro (TRY/EUR), Turkish Lira/Japanese Yen (TRY/JPY) and Turkish Lira/Swiss Franc (TRY/CHF) exchange rates in the global financial crisis period to detect the bubbles and crashes in the TRY by using a mathematical methodology developed by Watanabe et al. (2007). The methodology defines the bubbles and crashes in financial market price fluctuations by considering an exponential fitting of the associated data. This methodology is applied to detect the bubbles and crashes in the TRY/USD, TRY/EUR, TRY/JPY and TRY/CHF exchange rates from January, 1, 2005 to December, 20, 2013. In this mathematical methodology, the whole period of bubbles and crashes can be determined purely from past data, and the start of bubbles and crashes can be identified even before its bursts, In this way, the periods of bubbles and crashes in the TRY/USD, TRY/EUR, TRY/JPY and TRY/CHF are determined, and the beginning and end points of these periods are detected. The results show that the crashes in the TRY/CHF exchange rate are commonly finished earlier than in the other exchange rates; hence it is probable that the crashes in the other exchange rates would be finished soon when the crashes in the TRY/CHF exchange rate ended. We also find that the periods of crashes in the TRY/EUR exchange rate take longer time than in the other exchange rates. This information can be used in risk management and/or speculative gain. The crashes'periods in the TRY/EUR and TRY/USD exchange rates are observed to be relatively longer than in the other exchange rates. (C) 2014 Elsevier B.V. All rights reserved.