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Türki̇ye’De Hi̇sse Senedi̇ Fi̇yatlari Ve Dövi̇z Kuru Arasinda Doğrusal Ve Doğrusal Olmayan Eş Bütünleşme İli̇şki̇si̇
[Linear and Nonlinear Cointegration Relationship between Stock Prices and Exchange Rates in Turkey]

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  • Dogru, Bülent
  • Recepoglu, Mursit
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    Abstract

    The aim of this study is to analyze both the linear and nonlinear co-integration relationship between Euro and U.S. Dollar exchange rates and stock price index with monthly time-series data covering the time period 1980 - 2013 for Turkish Economy. Linear co-integration test is analyzed by the bound test approach, developed by Pesaran, Shin and Smith (2001), that does not need to be applied to the series that are stationary at the same level. Whereas, nonlinear co-integration analysis is investigated by Breitung (2001) rank test. Additionaly, because series has a structural break in trend in February 2001, analyzes are also employed for sub-periods. The empirical findings suggest there is a co-integration relationship between exchange rates and stock price index in the long run. This relationship is positive in long run and negative in short run. The direction of the relationship is from exchange rates to stock prices. Therefore, for Turkish Economy the "traditional approach” describing the relationship between stock prices and exchange rates is valid.

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    File URL: http://mpra.ub.uni-muenchen.de/50505/
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50505.

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    Date of creation: 17 Jun 2013
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    Handle: RePEc:pra:mprapa:50505

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    Keywords: Linear and Non Linear Co-integration; Bound Test; Rank Test; Exchange rates; Stock Price Index;

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    1. Breitung, Jörg, 1998. "Rank tests for nonlinear cointegration," SFB 373 Discussion Papers, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 1998,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Hooi Hooi Lean & Paresh Narayan & Russell Smyth, 2011. "Exchange Rate And Stock Price Interaction In Major Asian Markets: Evidence For Individual Countries And Panels Allowing For Structural Breaks," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 56(02), pages 255-277.
    3. Richard A. Ajayi & Mbodja Mougouė, 1996. "On The Dynamic Relation Between Stock Prices And Exchange Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, Southern Finance Association;Southwestern Finance Association, vol. 19(2), pages 193-207, 06.
    4. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, Elsevier, vol. 66(1-2), pages 225-250.
    5. Emirmahmutoglu, Furkan & Kose, Nezir, 2011. "Testing for Granger causality in heterogeneous mixed panels," Economic Modelling, Elsevier, Elsevier, vol. 28(3), pages 870-876, May.
    6. Bodnar, Gordon M. & Gentry, William M., 1993. "Exchange rate exposure and industry characteristics: evidence from Canada, Japan, and the USA," Journal of International Money and Finance, Elsevier, Elsevier, vol. 12(1), pages 29-45, February.
    7. Dornbusch, Rudiger & Fischer, Stanley, 1980. "Exchange Rates and the Current Account," American Economic Review, American Economic Association, American Economic Association, vol. 70(5), pages 960-71, December.
    8. Abdulnasser Hatemi-J & Eduardo Roca, 2005. "Exchange rates and stock prices interaction during good and bad times: evidence from the ASEAN4 countries," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(8), pages 539-546.
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