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Macroeconomic Fundamentals of Turkey Stock Market Volatility

Author

Listed:
  • Tastan, Huseyin

    (Yildiz Technical University)

  • Gungor, Arifenur

    (Yildiz Technical University)

Abstract

The aim of this study is to investigate the relationship between the slowly moving long-run component of daily volatility of Turkish stock market and a set of monthly macroeconomic variables. In the first stage, we estimate the long-term volatility of BIST100 index using GARCH-MIDAS (Mixed Data Sampling) method. Subsequently, we examine the relationship between the long-term volatility component and interest rate, USD/TL exchange rate, inflation rate, CDS premium, real sector confidence index and the volatility of S&P500 index using an autoregressive distributed lag (ARDL) model. Empirical results suggest that the most significant macroeconomic variable affecting the long-run volatility of BIST100 index is the exchange rate. Also, we show that the long-run volatility of BIST100 index is positively associated with both CDS premium and the volatility of S&P500. Finally, we find that an increase in real sector confidence index leads to a decrease in the long-run component of the BIST100 index volatility.

Suggested Citation

  • Tastan, Huseyin & Gungor, Arifenur, 2019. "Macroeconomic Fundamentals of Turkey Stock Market Volatility," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 10(4), pages 823-832, July.
    • Handle: RePEc:ris:buecrj:0425
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    More about this item

    Keywords

    Stock Market; Volatility; Macroeconomy; MIDAS; ARDL; BIST100;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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