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Testing the Relationship between Real Sector Confidence Index and Borsa Istanbul Sector Indices

Author

Listed:
  • Eyüboğlu, Sinem

    (Karadeniz Technical University)

  • Eyüboğlu, Kemal

    (Karadeniz Technical University)

Abstract

In recent years, it has been determined that investors are influenced by psychological factors while making investment decisions. Confidence indices are used to learn investors' expectations about the economy. In this paper, it is investigated whether there is short and long-run relationship between Borsa Istanbul sector indices and real sector confidence index. The short and long-run relationships between the stock indices and the real sector confidence index, which are determined to be stationary at different levels, are tested by ARDL Bound Test. The findings show that there is a relationship between the real sector confidence index and all sector indices both in the long-run and in the short-run. In addition, it is determined that the increase in real sector confidence index affects positively stock returns (except XULAS and XTAST) in the short-run. The results of causality showed that mostly there is a causality relationship from sector indices to real sector confidence index. Thus, it has been shown that psychological factors should be considered as determinants of changes in the stock market.

Suggested Citation

  • Eyüboğlu, Sinem & Eyüboğlu, Kemal, 2018. "Testing the Relationship between Real Sector Confidence Index and Borsa Istanbul Sector Indices," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 9(1), pages 75-86, January.
    • Handle: RePEc:ris:buecrj:0314
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    More about this item

    Keywords

    Real Sector Confidence Index; Borsa Istanbul; Bound Test; Toda-Yamamoto Causality Test;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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