Relationship between Financial Services Confidence Index and Stock Market Returns: Toda-Yamamoto and Asymmetric Causality Analysis

Yunus Emre Turan () and Dinara Zubaidullina ()
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Yunus Emre Turan: Sakarya Üniversitesi, Siyasal Bilgiler Fakültesi, Ekonometri Bölümü, Sakarya, Türkiye
Dinara Zubaidullina: Sakarya Uygulamalı Bilimler Üniversitesi, Uygulamalı Bilimler Fakültesi Uluslararası Ticaret ve Finansman Bölümü, Sakarya, Türkiye

EKOIST Journal of Econometrics and Statistics, 2024, vol. 0, issue 41, 97-108

Abstract: The management of expectations is a critical factor in shaping the dynamics of financial markets. Therefore, changes in confidence indices, which reflect the expectations of economic agents, are closely monitored by economists. This study examines the sectoral relationships between the Financial Services Confidence Index and stock market returns in Turkey for the period from June 2012 to May 2024. To compare the causality results, the relationships between the variables were analysed using the Toda-Yamamoto (1995) and Hatemi-J (2012) causality tests. According to the results of the Toda-Yamamoto (1995) causality test, no causality relationship was found between the Financial Services Confidence Index and the Borsa Istanbul (BIST) sector index returns. However, an asymmetric causality relationship was identified between the variables. Thus, it is observed that hidden relationships, which could not be detected by the Toda-Yamamoto (1995) causality test, were revealed through the asymmetric causality test. According to the results of the asymmetric causality test, a causality relationship from the Financial Services Confidence Index to the BIST Financial index returns was found for negative shocks. There is a causality relationship from the BIST Electricity index and the BIST Financial Leasing and Factoring index returns to the Financial Services Confidence Index in both positive and negative shocks. A causality relationship from the BIST Information Technology index and the BIST Technology index returns to the Financial Services Confidence Index was found in positive components. A causality relationship from the BIST Services index and BIST Industrial index returns to the Financial Services Confidence Index was also found among the negative shocks. Considering the results obtained from the study, it can be stated that the Financial Services Confidence Index is a variable that should be considered in terms of changes in financial markets.

Keywords: Financial Services Confidence Index; Sector Indices; Toda-Yamamoto (1995) causality test; Asymmetric causality test (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ist:ekoist:v:0:y:2024:i:41:p:97-108

DOI: 10.26650/ekoist.2024.41.1537848

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