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Financial Crisis and Changes in Determinants of Risk and Return: An Empirical Investigation of an Emerging Market (ISE)

Author

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  • Gulnur Muradoglu

    (University of Manchester, U.K.)

  • Hakan Berument

    (Bilkent University, Turkey)

  • Kivilcim Metin

    (Bilkent University, Turkey)

Abstract

This paper examines how determinants of volatility and stock returns change with financial crisis. The contributions of the paper are twofold. First, using a GARCH-M framework, risk and return are jointly modeled by using macroeconomic variables both in the variance and the mean equations. The conditional variance equation is specified by including macro-economic variables, a relevant information set for emerging economies, that is often overlooked in various GARCH specifications. Second, determinants of risk and return are investigated before during and after a major financial crisis at ISE. We show that, both the determinants of risk and the risk-return relationship change as the economy switches from one regime to the other.

Suggested Citation

  • Gulnur Muradoglu & Hakan Berument & Kivilcim Metin, 1999. "Financial Crisis and Changes in Determinants of Risk and Return: An Empirical Investigation of an Emerging Market (ISE)," Multinational Finance Journal, Multinational Finance Journal, vol. 3(4), pages 223-252, December.
    • Handle: RePEc:mfj:journl:v:3:y:1999:i:4:p:223-252
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    References listed on IDEAS

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    Cited by:

    1. Adaoglu, Cahit, 2006. "Market reaction to "unsweetened" and "sweetened" rights offerings in an emerging European stock market," Journal of Multinational Financial Management, Elsevier, vol. 16(3), pages 249-268, July.

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    More about this item

    Keywords

    emerging; financial crisis; GARCH-M; Istanbul Stock Exchange; macroeconomic variables; risk; stock returns;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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