Analyzing the price bubble with the LPPLS method: An application on the aviation industry

In order to detect price froths, an application on the aviation industry has been carried out with the LPPLS method, which is very rarely applied in the literature. The monthly adjusted prices covering the period from October 2005 to November 2022 and the price foam on the world's largest publicly traded airlines and the largest commercial aircraft manufacturers by IATA are tested and analyzed by both GSADF and LPPLS method. According to the results, American Airlines, Singapore Airlines, Boeing Co., Southwest Airlines and Turkish Airlines were found to have price froth in more than one period. Likewise, the results obtained were compared with LPPLS. The results of the LPPS method are found to be successful, and when the detailed results of the LPPLS method are analyzed, positive price bubble formations are observed before the crisis period. Negative price bubbles were observed during the periods when the crises were over and the prices in the stock market stabilized and volatility decreased. In short, the LPPLS method detects and warns of crises in advance, and on the contrary, it detects negative price bubbles below the fundamental values of the relevant companies and indicates that the prices of the relevant companies in the stock market are approaching the buying point. It is expected that the results of this application will contribute to the literature, all investors, market participants, companies, fund and portfolio managers and those who will work in the related field.