Estimating the Effects of Interest Rates on Share Prices in Turkey Using a Multi-Scale Causality Test

Atilla Cifter and Alper Ozun
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Atilla Cifter: Sekerbank and Marmara University
Alper Ozun: Is Bank of Turkey

Review of Middle East Economics and Finance, 2008, vol. 4, issue 2

Abstract: This paper examines the impact of changes in interest rates on stock returns in Turkey by using wavelet analysis with Granger causality tests. By using daily closing values of the ISE 100 Index and interest rates, it is proven that starting with the 9 day time-scale effect, Granger interest rates cause the ISE 100 index and the effect of interest rates on stock returns to increase with higher time-scales. This evidence shows that the bond market has a significant long-term effect on the stock market in Turkey.

Keywords: JEL: C53; C14; G10 / Financial Economics; Return Predictability; interest rates; emerging markets; wavelets; stock returns; multi-scale Granger causality (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:bpj:rmeecf:v:4:y:2008:i:2:n:2

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