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The Impact of Domestic and Global Risk Factors on Turkish Stock Market: Evidence from the NARDL Approach

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  • Levent Erdoğan
  • Reşat Ceylan
  • Mutawakil Abdul-Rahman

Abstract

The study investigates the short-run and long-run asymmetric effects of the global economic policy uncertainty, real oil prices, and country-specific geopolitical risk on real stock returns in Turkey by using the nonlinear autoregressive distributed lag (NARDL) framework over the pre-COVID-19 period of 1997:01–2019:12 and full-sample period of 1997:01–2020:12. The empirical findings indicate the following results. Firstly, global economic policy uncertainty leads to depress real stock returns for both sample periods. Secondly, negative real oil price changes, in the long run, have relatively greater effects compare to positive changes on real stock returns, whereas positive oil price changes affect negatively in the short-run for the full-sample period. Thirdly, the country-specific geopolitical risk exerts positive effects on the real stock returns in the long run for both periods. The overall results suggest that the Turkish real stock returns react more to the bad news caused by the global factors than the domestic one.

Suggested Citation

  • Levent Erdoğan & Reşat Ceylan & Mutawakil Abdul-Rahman, 2022. "The Impact of Domestic and Global Risk Factors on Turkish Stock Market: Evidence from the NARDL Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(7), pages 1961-1974, May.
  • Handle: RePEc:mes:emfitr:v:58:y:2022:i:7:p:1961-1974
    DOI: 10.1080/1540496X.2021.1949282
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    Cited by:

    1. Harshana, P.V.S. & Ratnasiri, Shyama, 2023. "Asymmetric price transmission along the supply chain of perishable agricultural commodities: A nonlinear ARDL approach," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    2. Osama D. Sweidan, 2023. "The Effect of Geopolitical Risk on Income Inequality: Evidence from a Panel Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 167(1), pages 47-66, June.

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