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The Effect of Macroeconomic Factors on Asset Returns: A Comparative Analysis of the German and the Turkish Stock Markets in an APT Framework

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Author Info
Erdinc Altay (Istanbul University, Faculty of Economics)

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Abstract

This paper uses factor analytic techniques for deriving factor realizations from a group of main economic indicators of both the German and the Turkish economy in order to test the effect of economic factors on asset returns in an APT framework. The factor structure of the German economy yields 4 factors, whereas the Turkish economy has only 3 factors even though the same economic indicators are employed in the factor analysis procedures. We found some evidence of the unexpected interest rate factor and the unexpected inflation factor beta coefficients having significant effects on asset returns of the German Stock Market. But we were not able to find any unexpected macroeconomic factor beta with a significant influence on asset returns in the Turkish Stock Market.

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Paper provided by EconWPA in its series Finance with number 0307006.

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Length: 36 pages
Date of creation: 15 Jul 2003
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Handle: RePEc:wpa:wuwpfi:0307006

Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on PostScript; pages: 36 ; figures: included
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Related research
Keywords: Asset Pricing; Arbitrage Pricing Theory; Factor Analysis; Expected Returns; Principle Components;

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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