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Dynamic Effects of Macroeconomic Fundamentals on Stock Market Movements: Evidence from BIST100

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Abstract

In this study we examine whether the Efficient Market Hypothesis (EMH) is valued in Turkey (BIST1001 ) or not and we also examine the ability of essential macroeconomic variables to predict the volatility of Istanbul stock market returns. The relationship is examined through the analysis of the quarterly data concerning the Istanbul stock market index (BIST-100 ) and selected essential macroeconomic indicates in Turkey over the period of 2003Q01 until 2019Q01. In order to investigate the relationship between the variables and BIST-100, Phillips-Ouliaris Cointegration, Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL (NLARDL) models and also Bayesian Vector Autoregression (Litterman-Minnesota Bayesian VAR) are employed. The findings of the NLARDL test indicates that variables are cointegrated and there is positive and statistically significant asymmetric long run relationship from inflation to Istanbul stock market and also GDP, nominal exchange rate, S&P500 have significant and positive long run effect on Istanbul stock market return. These results suggest that the Istanbul stock market return (BIST-100) has consistent with the Efficient Market Hypothesis (EMH).

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  • OJAGHLOU, Mortaza, 2020. "Dynamic Effects of Macroeconomic Fundamentals on Stock Market Movements: Evidence from BIST100," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 5(2), pages 17-36, December.
    • Handle: RePEc:ris:betajl:0048
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    More about this item

    Keywords

    BIST-100; Stock Return Volatility; NLARDL; Bayesian VAR;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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