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The Relationship between Exchange Rates, Equity Index and Equity Index Futures: A Study on Borsa Istanbul

Author

Listed:
  • AYBEN KOY

    (ISTANBUL COMMERCE UNIVERSITY)

  • ?HSAN ERSAN

    (ISTANBUL UNIVERSITY)

Abstract

This paper examines the linkages between the foreign exchange rates, spot equity index and equity index futures. The study aims to investigate whether there is difference between the spot and futures markets in the scope of relation with the foreign exchange rates? returns and which leads the other. The relationships are examined by using the vector autoregression (VAR) model, impulse-response functions, variance decomposition and Granger Causality tests. The sample of the study consists of US dollar to Turkish Lira rate (USD/TRY), Euro to Turkish Lira rate (EUR/TRY), BIST 30 Index and BIST 30 Index Futures. The data of the study includes the period between January 2011 and December 2014 with daily data range. Our results have evidence that the foreign exchange rate markets in Turkey are driven by the equity market.

Suggested Citation

  • Ayben Koy & ?Hsan Ersan, 2016. "The Relationship between Exchange Rates, Equity Index and Equity Index Futures: A Study on Borsa Istanbul," Proceedings of International Academic Conferences 3605506, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:3605506
    as

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    References listed on IDEAS

    as
    1. Roll, Richard, 1992. "Industrial Structure and the Comparative Behavior of International Stock Market Indices," Journal of Finance, American Finance Association, vol. 47(1), pages 3-41, March.
    2. Bruce Morley, 2007. "The monetary model of the exchange rate and equities: an ARDL bounds testing approach," Applied Financial Economics, Taylor & Francis Journals, vol. 17(5), pages 391-397.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Exchange Rates; Equity Index; Equity Index Futures; Causality;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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