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Investigating Exchange Rate Exposure of Bank Shares: Empirical Evidence From ISE

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  • Serkan Yilmaz Kandir
  • Ahmet Erismis

Abstract

In this study, exchange rate exposure of Turkish banks and the reasons of this exposure are investigated. In this manner, data of 11 banks whose shares are traded in Istanbul Stock Exchange for the time period that spans from July of 1999 to June of 2009 are used. Regression models that are developed by adding Exchange rate factor to capital asset pricing model and Fama-French Three Factor Model are employed. Analysis results suggest that exchange rate risk is significant for two banks. On the other hand, exchange rate risk seems to impact Turkish banks at different levels. The two banks that are found to be affected by exchange rate risk appear to be smaller and tend to use fewer derivatives when they are compared with other banks.

Suggested Citation

  • Serkan Yilmaz Kandir & Ahmet Erismis, 2010. "Investigating Exchange Rate Exposure of Bank Shares: Empirical Evidence From ISE," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 12(46), pages 49-83.
    • Handle: RePEc:bor:iserev:v:12:y:2010:i:46:p:49-83
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    More about this item

    Keywords

    Exchange rate exposure; bank shares; derivatives.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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