Resources Policy 68 (2020) 101780 Available online 10 August 2020 0301-4207/© 2020 Elsevier Ltd. All rights reserved. Is palladium price in bubble? Khalid Khan a , Sinem Derindere K¨ oseo˘ glu b, * a School of Finance, Qilu University of Technology, China b PhD in Istanbul University, Turkey A R T I C L E INFO JELclassifcation: L61 B41 E30 Keywords: Palladium price bubble Generalized supremum ADF Precious metals ABSTRACT This paper examines whether the palladium (PAL) prices show multiple bubbles by using the Generalized Supremum ADF test for the period 1994:01–2020:01. It is regarded as a pertinent procedure to observe the emergence and termination of multiple bubbles. The results show the emergence of four bubbles for the periods 1997–1998, 1999–2001, 2011 and 2019–2020. Therefore, PAL prices deviate from its fundamental value during 1994–2020 four times. This indicates that PAL prices include fundamental and bubble elements. The emergence and termination of bubbles are generally related to particular events. The frst price bubble was led by the switchover of the automakers from the platinum to PAL and supply interruption by Russia. The second PAL price bubble took place due to the supply disruption by Russia, demand increase due to technology boom and usage of PAL as collateral against the international loans. Geopolitical tension rising from the largest producer of PAL, from Russia and South Africa, leads to the next PAL prices bubble. Finally, the main driver of the last bubble includes supply defcit, low production, and tight environmental regulations. The appropriate policies required to implement to reduce tragic results when the price bubbles burst. Moreover, the causes and effects can be scrutinized by considering the time period and dates of PAL price bubbles and measures can be taken to prevent the bubbles. 1. Introduction When the price of an asset deviates from its fundamental value, it is considered that price bubbles exist in the market. It can examine many price bubbles in the real industries and fnancial markets in real life. If the initial price of an asset increases suddenly during a particular period and then drops dramatically, the presence of a price bubble can be observed (Lind, 2009). The formation of price bubbles in the markets is a situation that must be followed by the economic and fnancial author- ities. Some crises in the history arose due to the burst of the price bub- bles such as the dot-com bubble in 2001, the house price bubble and mortgage crises in 2008. If we go back further in the history, there is a belief that the main cause of the 1929 Global Depression is the huge increase in the price of common stocks. Especially, when the price bubbles are determined for the asset, those assets will become more attractive for the investors, thus the demand will increase more. This situation even leads to other increases in asset prices. However, when investors think that prices will not increase anymore, the price bubbles disappear, demand falls and crises can take place (Case and Shiller, 2003; Shiller, 2003). Therefore, signifcant effects of price bubbles are observed in both fnancial and real markets, and it needs to be analyzed. Price bubbles of precious metals in markets have also signifcant importance for both fnancial and real markets, since the precious metals such as silver, gold, platinum and palladium are not only tools for in- vestment in fnancial markets but also tools for industry in the real markets. This study analyzes whether multiple bubbles are observed in the palladium (PAL) price. The emergence of PAL price bubbles in the market has importance for fnancial investors in terms of investment timing and hedging of price risk in the real industry. Therefore, the PAL price changes are signifcant for risk management strategies for various industries. Palladium metal is an important input for car and truck manufacturers and has been used in industrial application for several decades. It is also an input for electronics, dentistry and jewelry sectors. However, the biggest usage of the PAL in the exhaust system in the cars which helps in conversion of the toxic pollutants into less harmful car- bon dioxide (Figuerola-Ferretti et al., 2015). Since the PAL price effects signifcantly of the manufacturers’ production cost, they need to hedge the PAL price risk. The PAL price can be hedged to offset price risk and so manufacturers can make production costs stable. Knowing the * Corresponding author. E-mail addresses: shah_khan884@yahoo.com (K. Khan), sinemderindere@hotmail.com (S. Derindere K¨ oseo˘ glu). Contents lists available at ScienceDirect Resources Policy journal homepage: http://www.elsevier.com/locate/resourpol https://doi.org/10.1016/j.resourpol.2020.101780 Received 23 February 2020; Received in revised form 8 June 2020; Accepted 22 June 2020