Title: Bubble migration across asset classes during the global financial crises
Authors: Isabel Figuerola-Ferretti - Universidad Pontificia Comillas (Spain) [presenting]
Roderick McCrorie - University of St Andrews (United Kingdom)
Ramon Bermejo Climent - Universidad Pontificia Comillas (Madrid, Spain) (Spain)
Gonzalo Suarez - ICADE (Spain)
Abstract: A new, mildly explosive/multiple bubbles technology is combined with a bubble migration test to analyse the time series behaviour of a number of key macroeconomic and financial variables during the Global Financial Crisis (GFC). Following a recent approach, we use a dry cargo single ocean freight rate in our case the Baltic Dry Index (BDI) as a gauge of the economy. An anticipatory measure, it captures near future demand shifts for industrial commodities in global markets. In the financial sector, we document relevant mildly explosive episodes/bubbles in credit default swap (CDS) portfolios, high yield bond portfolios, the ICE Libor USD 6 month rate and other commodity prices. We shall also detect such an episode in the real economy, where U.S. jobless claims showed a statistically significant, mildly explosive rise before the Lehman Brothers episode that many feel delineated the highpoint of the GFC. Our work provides a richer description of the macro and financial aspects of the GFC and brings to it other dimensions than have been offered hitherto.