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

Ayben Koy () and ?hsan Ersan ()
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Ayben Koy: ISTANBUL COMMERCE UNIVERSITY
?hsan Ersan: ISTANBUL UNIVERSITY

No 3605506, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

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.

Keywords: Exchange Rates; Equity Index; Equity Index Futures; Causality (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2016-05
New Economics Papers: this item is included in nep-ara and nep-cwa
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Published in Proceedings of the Proceedings of the 23rd International Academic Conference, Venice, May 2016, pages 258-271

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:3605506

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