The Analysis of Relationship between the Rate of Stock Return and Interest Rate with Nonlinear Methods: The Case of Turkey (original) (raw)
Related papers
The aim of this paper is to investigate the existence of both linear and non-linear cointegration relations between Euro and U.S. Dollar exchange rates and stock price index by using the closing price of the national Borsa Istanbul 100 index as well as the closing prices of the national industrial index, financial index and services index. The U.S. dollar and Euro exchange rates selling prices in TL is consider as exchange rates. For this purpose, Linear co-integration test is analyzed by bound test, developed by Pesaran, Shin and Smith (2001) and nonlinear cointegration is analyzed by Breitung (2001) rank test. Findings show that there is a co-integration relationship between stock prices and exchange rates in the long run term and short run term and mentioned relationship is positive in long run and negative in short run which means traditional approach describing the relationship between stock prices and exchange rates is exist in Turkey. Öz Çalışmada Türkiye ekonomisi için dolar ve döviz kurları ile hisse senedi fiyatları arasında doğrusal ve doğrusal olmayan eş bütünleşme ilişkisinin varlığının 1985-2016 yılları için analizi amaçlanmaktadır. Doğrusal eş bütünleşme analizi Pesaran, Shin and Smith (2001) tarafından geliştirilen ARDL Sınır testi yaklaşımı ile doğrusal olmayan eş bütünleşme analizi ise Breitung (2001) rank testi ile gerçekleştirilmektedir. Yapılan analizlerde elde edilen sonuçlara göre kur ile hisse senedi fiyatları arasında kısa ve uzun dönemde eş bütünleşme ilişkisi mevcut olup ilişki kısa dönemde negatif, uzun dönemde pozitiftir. Çalışma sonucunda Türkiye'de Geleneksel yaklaşımın geçerli olduğu anlaşılmıştır. Anahtar Kelimeler-Stock returns, Exchange rate, ARDL cointegration, Breitung Jel Sınıflandırması-F31, C58, G10
2018
Purpose The main purpose of this study in determine whether Bitcoin is becoming an alternative investment option compared to other financial instruments in Turkey. To perform analysis for this purpose, we created sample includes Bitcoin, Bist 100 National Index, Bond, Euro and Gold. We calculated daily returns in terms of % for each type of instrument for the period range from 02.02.2012 to 17.12.2018. Methodology In the study, we tested the stationarity of the series and the causality relationships between the series through the nonlinear unit root and causality tests. Stationarity of the series and causality relations between them are determined with the help of charts. Both in unit root test and in causality test, firstly we obtained test statistics and normalized them by using critical values then transferred them to the charts. In order to decide about when test statistics is higher than critical values null hypothesis is rejected. FindingsBitcoin, Usd, Gold and Bond are found ...
2013
Banks play a key role in the implementation of monetary policy and exchange rate. Since the macroeconomic variables affect stock returns, in this study investigates the significant relationship and accumulation relationship between Index s of bank Stock returns with macroeconomic variables such as exchange rates, short and long term interest rates for adopted bank in Tehran stock Exchange has been paid. Therefore, using time series data during 2003 to 2011 as a seasonal, suggested model is estimated. In this study, the multiple regression model, and Autoregressive Distributed Lag (ARDL) and error correction model (ECM) was used to test the model. The findings suggest that between the exchange rates and short-term interest rates with bank stock returns index is positive and significant relationship ( longterm variable interest rates was not significant and therefore has no effect on the model). According to the results obtained from a cointegration test is a long term relationship be...
The Impact of Interest Rate on the Stock Market Return Case Study: Tehran Stock Exchange
2018
The current study was carried out with the objective of studying and evaluating the dynamic impact of interest rate on the stock returns of the Tehran stock exchange. Based on the literature review, two hypotheses were pointed out, and in order to test these hypotheses, the data from the Iran Central Bank were used after theoretical investigations. The collected data were investigated annually for 16 years from 2002 through 2016. The collected data were estimated using the GARCH model. The analyses were performed in Excel and Eviews, and the results were obtained to be as follows. The results imply that the changes in this variable in the studied period was initially low at the beginning of the period and increased gradually in a generally oscillatory manner and increases in 2013.Observing the changes in this variable in the studied period shows that this variable is oscillatory in a sinusoidal form. The maximum changes drop, and the maximum changes were observed in 2008 and 2013, r...
This paper demonstrates a significant, long-running relationship between stock prices and domestic interest rates in Turkey's financial markets for the period of 2001 M1-2017 M4. Cointegration analysis is investigated using the autoregressivedistributed lag bounds (ARDL Bounds) test and vector autoregressive cointegration. Additionally, cointegrating equations such as the fully modified ordinary least square, dynamic ordinary least squares, and canonical cointegrating regression are applied to check the long-run elasticities in the concerned relationship. The ARDL Bounds and Johansen Cointegration test results show that, dynamically, both prices are significantly related to each other. The cointegrating equation outcomes demonstrate elasticities whereby both coefficients have negative signs. Additionally, the same results are corroborated by the impulse response where all variables respond negatively to each other.
This paper empirically examines the efficient market hypothesis (EMH) in the Islamic stock market namely Jakarta Islamic Index by emphasizing on the random walk behavior and nonlinearity. In the first step, we employ Brock et al. (1996) test to examine the presence of nonlinear behavior in Jakarta Islamic Index. The evidence of nonlinear behavior in the indices, motivate us to use nonlinear ESTAR unit root test procedure recently developed by Kapetanios et al. (2003) and Kruse (2011). The nonlinear unit root test procedure fail to rejects the null hypothesis of unit root for the indices, suggesting that Jakarta Islamic Index characterized by random walk process supporting the theory of efficient market hypothesis. In addition, Lumsdaine and Papel (LP) test identified significant structural breaks in the index series.
2017
This research covers the influence of interest rate, exchange rate and inflation on stock returns of ASE Free float index. The three macro variables which are taken under consideration are deemed very major for the economy of any country. Therefore, any change among these variables consequence the economy in different ways. Thus, the authoritarian takes step in order to make adjusts in their rules which can involve the economy in a positive way. Ten years monthly data from 2005 to 2015 is taken in contemplation. Multiple regression models are applied on the data where result shows that firms are negatively correlated to interest rate and positively correlated to inflation with zero relationship with exchange rate and stock returns. Also, R square shows a weak relationship between independent and dependent variables.
The Impacts of Interest Rate on Stock Market: Empirical Evidence from Dhaka Stock Exchange
Stock exchange and interest rate are two crucial factor of economic growth of a country. The impacts of interest rate on stock exchange provide important implications for monitory policy, risk management practices, financial securities valuation and government policy towards financial markets. This study seeks evidence supporting the existence of market efficiency on the Dhaka Stock Exchange (DSE) based on the daily general price index 1994 to 2005 and also shows empirical relationship between stock index and interest rate in Bangladesh based on monthly data from May 1992 to June 2004. Stationary of market return is tested and found DSE Index does not follow random walk model indicate DSE is not efficient in week form. The linear relationship between share price and interest rate, share price and growth of interest rate, growth of share price and interest rate, and growth of share price and growth of interest rate were determined through ordinary least-square (OLS) regression. For all of the cases, included and excluded outlier, it is found that Interest Rate has significant negative relationship with Share Price and Growth of Interest Rate also has significant negative relationship with Growth of Share Price. So if the interest rate is considerably controlled in Bangladesh than it will be the great benefit of Dhaka Stock Exchange through demand pull way of more investor in share market and supply pull way of more extensional investment of companies. Key Words: Efficient Market Hypothesis, Random walk model, Market Return, Interest Rate, Investment, Dhaka Stock Exchange
This research paper is an endeavor to empirically investigate the economic effects of interest rates and exchange rates on stock market capitalization by considering annual data for Pakistan covering the 1990-2017 periods. The main intention of this research is to analyze the short-run together with the long-run interconnections between the aggregate market capitalization and macroeconomic variables by employing the econometric tools of Johansen approach, Error Correction Model (ECM) and then inspection of Variance Decomposition. And finally, causal linkages have been explored by the application of Granger-Causality test. By applying the Johansen Jeselius approach, it is detected that the whole series of data are co-integrated showing the long-term relationships among the examined variables. The long-term coefficient shows that a 1% increase in interest rate and in exchange rate contributes 0.23% decrease and 3.17% increase in market capitalization, respectively. The estimated ECM lagged value illustrates that in the short period, 22.07% volatility of market capitalization are corrected per annum to reach at the steady-state. And the analysis of Granger-causality tool reports the existence of a unidirectional causality from foreign exchange rate to interest rate. The further reduction of bank rate in the economy has been recommended in this study to facilitate the financial sector development as well as to stimulate the investment level both nationally and internationally. Cite This Article: Waqar Khalid, " Effects of Interest Rate and Exchange Rate on the Stock Market