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Determinants of Financial vs. Non Financial Stock Returns: Evidence from Istanbul Stock Exchange

Author

Listed:
  • Mustafa Caglayan

    (Department of Economics, The University of Sheffield)

  • Fatma Lajeri-Chaherli

Abstract

We estimate a four-factor model for a sample of financial and nonfinancial firms traded on the Istanbul Stock Exchange (ISE). The factors relate to market return, interest, inflation and exchange rates. By investigating the effects of these factors simultaneously for different exchange rate regimes, we show that market return, interest, inflation, and exchange rates play a separate role in financial and nonfinancial firms´ stock returns. We also show that all factors are priced during the period of free float. These results are important for determining financial institutions' cost of capital and for identifying the risks that should be hedged.

Suggested Citation

  • Mustafa Caglayan & Fatma Lajeri-Chaherli, 2009. "Determinants of Financial vs. Non Financial Stock Returns: Evidence from Istanbul Stock Exchange," Working Papers 2009007, The University of Sheffield, Department of Economics, revised Apr 2009.
    • Handle: RePEc:shf:wpaper:2009007
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    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2009_007.html
    File Function: First version, 2009
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    More about this item

    Keywords

    Interest rate risk; Inflation risk; Foreign exchange risk;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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