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Long Run Relationships between Stock Market Returns and Macroeconomic Performance: Evidence from Turkey

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Author Info

  • Osman Karamustafa

    (Ondokuz Mayis University)

  • Yakup Kucukkale

    (Karadeniz Technical University)

Abstract

The purpose of this study is to investigate whether current economic activities in Turkey have explanatory power over stock returns, or not. The data used in this study are monthly stock price indexes of Istanbul Stock Exchange and a set of macroeconomic variables, including money supply, exchange rate of US Dollar, trade balance, and the industrial production index. Engel-Granger and Johansen-Juselius co-integration tests and Granger Causality test were used in the study to explain the long-run relations among variables questioned. Obtained results illustrate that stock returns is co-integrated with a set of macroeconomic variables by providing a direct long-run equilibrium relation. However, the macroeconomic variables are not the leading indicators for the stock returns, because any causal relation from macroeconomic variables to the stock returns can not be determined in sample period. Contrarily, stock returns is the leading indicator for the macroeconomic performance for the Turkish case by supporting emerging market issues.

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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0309010.

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Length: 8 pages
Date of creation: 13 Sep 2003
Date of revision:
Handle: RePEc:wpa:wuwpfi:0309010

Note: Type of Document - Acrobat PDF; prepared on MSWordXP; to print on Acrobat PDF; pages: 8 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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Keywords: Stock Returns Macroeconomic Performance Emergency Market Cointegration Causality;

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