ANALYSIS OF THE RELATIONSHIP BETWEEN MACROECONOMIC VARIABLES and BIST-30 STOCK RETURNS

Abstract

In addition to the fundamental macroeconomic indicators such as inflation and interest rate which are very important for foreign investors, the Credit Default Swap (CDS), that shows the credit risk level of the country, is an important research topic. Therefore, in this study, it is aimed to examine the effects of Turkey CDS and selected macroeconomic variables on the Istanbul Stock Exchange (ISE) 30 index (XU30). For this purpose, Granger Causality Relations, Impulse-Response Charts and Variance decomposition were made under the VAR model for 2010: 06 and 2020: 02 monthly periods. According to the results of the study, it was concluded that there was no Granger Causality relationship from variables to XU30 and XU30 stock returns toward selected macroeconomic indices either. However, it is found that shocks in CDS for two and a half months were responded negatively by XU30 returns at the significant beginning. Also, the positive and significant impact of the interest rate is worth to consider.

Which Index is More Affected by CDS Premium and VIX Index: BIST-30 or Participation-30?

“…The cointegration tests revealed cointegration relationships, that is, a long-term equilibrium relationship, between both the BIST-30 index and the Participation-30 index and the variables of the CDS premium and the VIX index for both pre-COVID-19 pandemic period and the pandemic period. This result is consistent with the existing studies in the literature that found out cointegration relation between, for example, the BIST-30 and the CDS premium (Kılcı, 2017;Noorie et al, 2020), and between the Participation-30 and the VIX index (İlgin, 2021).…”

“…Focusing on the CDS premium and the BIST-30 index, Kılcı (2017) found a cointegration relationship by using Engle-Granger cointegration test. Koy (2015) determined, based on Impact-Response graphs, mutual interaction while Variance Decomposition test by Noorie et al (2020) indicated a negative relationship between the same variables. On the other hand, Essayem et al (2022), found a negative relationship between the CDS premium and the Participation-30 index using the quantile regression method.…”

Identification of Multiple Bubbles in Turkish Financial Markets: Evidence From Gsadf Approach

“…The direction of causality does not change from the second week of March 2020 to the end of the sample period during the COVID-19 pandemic, indicating that the movements in CDS spreads are influential factors in predicting future stock prices in Turkey. The results contradict Gök (2020) and Noorie et al (2020), who do not find any significant evidence of causality.…”

“…In another noteworthy empirical study, Gök and Çankal (2020) examined the bondstock market relationship at the aggregate and sectoral levels and found that both market returns were significant predictors of each other in the medium and long time horizons and there was a one-way causality from the negative shocks in stock prices to the positive shocks in interest rates. No causality, however, was found by Noorie et al (2020) among stock, CDS, and bond markets in Turkey. Hassan et al (2017), on the other hand, investigated the CDS-currency market relationship in Turkey employing both the rolling window causality and the Markov Switching VAR methods during the period 2009-2015.…”