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The Effect of Macroeconomic Factors on Asset Returns: A Comparative Analysis of the German and the Turkish Stock Markets in an APT Framework

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  • Erdinc Altay

    (Istanbul University, Faculty of Economics)

Abstract

This paper uses factor analytic techniques for deriving factor realizations from a group of main economic indicators of both the German and the Turkish economy in order to test the effect of economic factors on asset returns in an APT framework. The factor structure of the German economy yields 4 factors, whereas the Turkish economy has only 3 factors even though the same economic indicators are employed in the factor analysis procedures. We found some evidence of the unexpected interest rate factor and the unexpected inflation factor beta coefficients having significant effects on asset returns of the German Stock Market. But we were not able to find any unexpected macroeconomic factor beta with a significant influence on asset returns in the Turkish Stock Market.

Suggested Citation

  • Erdinc Altay, 2003. "The Effect of Macroeconomic Factors on Asset Returns: A Comparative Analysis of the German and the Turkish Stock Markets in an APT Framework," Finance 0307006, EconWPA.
  • Handle: RePEc:wpa:wuwpfi:0307006
    Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on PostScript; pages: 36 ; figures: included
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    References listed on IDEAS

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    Cited by:

    1. Faruque, Muhammad U, 2011. "An empirical investigation of the arbitrage pricing theory in a frontier stock market: evidence from Bangladesh," MPRA Paper 38675, University Library of Munich, Germany.
    2. Padrón, Yaiza García & Boza, Juan García, 2006. "Which are the Risk Factors in the Pricing of Personal Pension in Spain?," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 60(2), November.

    More about this item

    Keywords

    Asset Pricing; Arbitrage Pricing Theory; Factor Analysis; Expected Returns; Principle Components;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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