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The Determinants of Stock Market Index: VAR Approach to Turkish Stock Market

  • Esref Savas BASCI

    (Department of Business Administration, Hitit University, Turkey)

  • Süleyman Serdar KARACA

    (Department of Business Administration, Gaziosmanpasa University, Turkey.)

In this paper, we examined the relationship between ISE 100 Index and a set of four macroeconomic variables using Vector Autoregressive (VAR) model. Variables we used in our model are Exchange, Gold, Import, Export and ISE 100 Index. ISE 100 Index is a dependent variable and the others are independent variables. In this study we used 190 observations for the sample period from January, 1996 to October, 2011. All variables have seasonal movements. After seasonal adjustments, all series have had stationary in their first difference. After determining optimal lag order, it was given one standard deviation shock for each series and their response. And in variance decomposition carried out subsequently, it has been determined that especially as of the second default of exchange, it was explained 31% by share indices.

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Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

Volume (Year): 3 (2013)
Issue (Month): 1 ()
Pages: 163-171

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Handle: RePEc:eco:journ1:2013-01-16
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  1. Lee, Bong-Soo, 1992. " Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation," Journal of Finance, American Finance Association, vol. 47(4), pages 1591-603, September.
  2. Purna Chandra Padhan, 2007. "The nexus between stock market and economic activity: an empirical analysis for India," International Journal of Social Economics, Emerald Group Publishing, vol. 34(10), pages 741-753, October.
  3. Fangxiong Gong & Roberto Mariano, 1997. "Stock Market Returns and Economic Fundamentals in an Emerging Market: The Case of Korea," Asia-Pacific Financial Markets, Springer, vol. 4(2), pages 147-169, May.
  4. Gjerde, Oystein & Saettem, Frode, 1999. "Causal relations among stock returns and macroeconomic variables in a small, open economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(1), pages 61-74, January.
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