IDEAS home Printed from https://ideas.repec.org/a/sos/sosjrn/190306.html
   My bibliography  Save this article

The Influence of Institutional Quality and Financial Risk on Stock Market Index: An Empirical Study for TurkeyAbstract: This paper aims to analyze the -possible- effects of institutional quality and (financial) risk level on BIST 100, BIST Industrial and BIST Financial Indexes via Carrioni-Silvestre (2009) multiple structural breaks unit root test, Maki (2012) multiple structural breaks co-integration test and Dynamic Ordinary Least Squares (DOLS) methodology. In the research model of the study, institutional structure is proxied by an institutional quality index derived from data related to bureaucratic quality, corruption, democratic accountability, ethnic tension, external conflict, government stability, internal conflict, political risk, law and order, and investment profile obtained from International County Risk Guide (ICRG). High values in institutional quality index represent weak institutional structure while low values represent high institutional structure. The high financial risk ratio represents a strong financial structure. The empirical findings of Maki (2012) test indicate that all indexes except BIST Financial Index and explanatory variables show co-integration relationship in the long term. Long run parameters estimated by DOLS methodology indicate that there exists a long-term negative relationship between institutional quality index and BIST 100 and BIST Industrial Indexes, while a positive relationship between financial risk level and BIST 100 and BIST Industrial Indexes

Author

Listed:
  • Yüksel İLTAŞ
  • Gülbahar ÜÇLER

Abstract

No abstract is available for this item.

Suggested Citation

  • Yüksel İLTAŞ & Gülbahar ÜÇLER, 2019. "The Influence of Institutional Quality and Financial Risk on Stock Market Index: An Empirical Study for TurkeyAbstract: This paper aims to analyze the -possible- effects of institutional quality and (," Sosyoekonomi Journal, Sosyoekonomi Society, issue 27(41).
    • Handle: RePEc:sos:sosjrn:190306
    as

    Download full text from publisher

    File URL: http://dergipark.gov.tr/download/article-file/772457
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carrion-i-Silvestre, Josep Lluís & Kim, Dukpa & Perron, Pierre, 2009. "Gls-Based Unit Root Tests With Multiple Structural Breaks Under Both The Null And The Alternative Hypotheses," Econometric Theory, Cambridge University Press, vol. 25(6), pages 1754-1792, December.
    2. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
    3. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    4. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
    5. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
    6. Law, Siong Hook & Azman-Saini, W.N.W., 2008. "The Quality of Institutions and Financial Development," MPRA Paper 12107, University Library of Munich, Germany.
    7. Charles Amo Yartey, 2008. "The Determinants of Stock Market Development in Emerging Economies: Is South Africa Different?," IMF Working Papers 2008/032, International Monetary Fund.
    8. Asgharian, Hossein & Liu, Lu & Lundtofte, Frederik, 2014. "Institutional Quality, Trust and Stock-Market Participation: Learning to Forget," Working Papers 2014:39, Lund University, Department of Economics.
    9. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    10. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    11. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    12. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    13. Perotti, Enrico C. & van Oijen, Pieter, 2001. "Privatization, political risk and stock market development in emerging economies," Journal of International Money and Finance, Elsevier, vol. 20(1), pages 43-69, February.
    14. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers of the African Governance and Development Institute. 11/019, African Governance and Development Institute..
    15. Tarun K. Mukherjee & Atsuyuki Naka, 1995. "Dynamic Relations Between Macroeconomic Variables And The Japanese Stock Market: An Application Of A Vector Error Correction Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(2), pages 223-237, June.
    16. Abdulnasser Hatemi-J, 2008. "Tests for cointegration with two unknown regime shifts with an application to financial market integration," Empirical Economics, Springer, vol. 35(3), pages 497-505, November.
    17. Benson Durham, J., 2002. "The effects of stock market development on growth and private investment in lower-income countries," Emerging Markets Review, Elsevier, vol. 3(3), pages 211-232, September.
    18. Kwon, Chung S. & Shin, Tai S., 1999. "Cointegration and causality between macroeconomic variables and stock market returns," Global Finance Journal, Elsevier, vol. 10(1), pages 71-81.
    19. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-560, August.
    20. Siong Hook Law & Muzafar Shah Habibullah, 2009. "The Determinants Of Financial Development: Institutions, Openness And Financial Liberalisation," South African Journal of Economics, Economic Society of South Africa, vol. 77(1), pages 45-58, March.
    21. Roberto Rigobon & Dani Rodrik, 2004. "Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships," NBER Working Papers 10750, National Bureau of Economic Research, Inc.
    22. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    23. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    24. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    25. Charles O. Manasseh & Timothy E. Mathew & Jonathan E. Ogbuabor, 2017. "Investigating the Nexus between Institutional Quality and Stock Market Development in Nigeria: An Autoregressive Distributed Lag (ARDL) Approach," African Development Review, African Development Bank, vol. 29(2), pages 272-292, June.
    26. Mukherjee, Tarun K & Naka, Atsuyuki, 1995. "Dynamic Relations between Macroeconomic Variables and the Japanese Stock Market: An Application of a Vector Error Correction Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 18(2), pages 223-237, Summer.
    27. Andreas Humpe & Peter Macmillan, 2009. "Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan," Applied Financial Economics, Taylor & Francis Journals, vol. 19(2), pages 111-119.
    28. Mohammed Nishat & Rozina Shaheen, 2004. "Macroeconomic Factors and Pakistani Equity Market," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 619-637.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cumhur ÞAHÝN & Hüseyin ALTAY, 2016. "Examination of the Relationship between Turkey’s Credit Default Swap (CDS) Points and Unemployment," Eurasian Business & Economics Journal, Eurasian Academy Of Sciences, vol. 4(4), pages 52-67, January.
    2. Chiappini, Raphaël & Jégourel, Yves & Raymond, Paul, 2019. "Towards a worldwide integrated market? New evidence on the dynamics of U.S., European and Asian natural gas prices," Energy Economics, Elsevier, vol. 81(C), pages 545-565.
    3. Matteo Mogliani, 2010. "Residual-based tests for cointegration and multiple deterministic structural breaks: A Monte Carlo study," Working Papers halshs-00564897, HAL.
    4. Esra N. Kılcı & Burcu Kıran Baygın, 2019. "Analysis of the Relationship between Real Effective Exchange Rate, Common Equity Tier 1 Ratio and Return on Equity: Evidence from Turkey," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 7(2), pages 319-332, December.
    5. Khan, Zeeshan & Hussain, Muzzammil & Shahbaz, Muhammad & Yang, Siqun & Jiao, Zhilun, 2020. "Natural resource abundance, technological innovation, and human capital nexus with financial development: A case study of China," Resources Policy, Elsevier, vol. 65(C).
    6. Charfeddine, Lanouar, 2017. "The impact of energy consumption and economic development on Ecological Footprint and CO2 emissions: Evidence from a Markov Switching Equilibrium Correction Model," Energy Economics, Elsevier, vol. 65(C), pages 355-374.
    7. Charfeddine, Lanouar & Ben Khediri, Karim, 2016. "Financial development and environmental quality in UAE: Cointegration with structural breaks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1322-1335.
    8. Katircioğlu, Salih Turan, 2014. "Testing the tourism-induced EKC hypothesis: The case of Singapore," Economic Modelling, Elsevier, vol. 41(C), pages 383-391.
    9. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(1), pages 3-29, June.
    10. Shruti SHASTRI & A.K. GIRI & Geetilaxmi MOHAPATRA, 2017. "An empirical assessment of fiscal sustainability for selected South Asian economies," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 163-178, Spring.
    11. Fantazzini, Dean & Toktamysova, Zhamal, 2015. "Forecasting German car sales using Google data and multivariate models," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 97-135.
    12. You, Kefei & Sarantis, Nicholas, 2012. "Structural breaks and the equilibrium real effective exchange rate of China: A NATREX approach," China Economic Review, Elsevier, vol. 23(4), pages 1146-1163.
    13. Tarlok Singh, 2017. "Are Current Account Deficits in the OECD Countries Sustainable? Robust Evidence from Time-Series Estimators," The International Trade Journal, Taylor & Francis Journals, vol. 31(1), pages 29-64, January.
    14. Marcos José Dal Bianco, 2008. "Argentinean real exchange rate 1900-2006, test purchasing power parity theory," Estudios de Economia, University of Chile, Department of Economics, vol. 35(1 Year 20), pages 33-64, June.
    15. EVRIM MANDACI, Pinar & CAGLI, Efe Caglar, 2016. "Who Drives Whom? Investigating The Relationship Between The Major Stock Markets," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 20(2), pages 6-24.
    16. Ümit BULUT, 2019. "The Monetary Policy Reaction Function in Turkey: Evidence from Fourier-Based Time Series Methods," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 69(2), pages 159-173, December.
    17. Chor Foon Tang & Ilhan Ozturk, 2017. "Can Inflation be Claimed as a Monetary Phenomenon? The Malaysian Experience," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 453-460.
    18. Zeeshan Khan & Muhsin Ali & Dervis Kirikkaleli & Salman Wahab & Zhilun Jiao, 2020. "The impact of technological innovation and public‐private partnership investment on sustainable environment in China: Consumption‐based carbon emissions analysis," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(5), pages 1317-1330, September.
    19. Beyer, Andreas & Dewald, William G. & Haug, Alfred A., 2009. "Structural breaks, cointegration and the Fisher effect," Working Paper Series 1013, European Central Bank.
    20. Schweikert, Karsten, 2018. "Testing for cointegration with threshold adjustment in the presence of structural breaks," Hohenheim Discussion Papers in Business, Economics and Social Sciences 07-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sos:sosjrn:190306. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Aysen Sivrikaya (email available below). General contact details of provider: http://www.sosyoekonomijournal.org/home.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.