Macroeconomic Fundamentals of Turkey Stock Market Volatility

Huseyin Tastan and Arifenur Gungor
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Arifenur Gungor: Yildiz Technical University

Business and Economics Research Journal, 2019, vol. 10, issue 4, 823-832

Abstract: The aim of this study is to investigate the relationship between the slowly moving long-run component of daily volatility of Turkish stock market and a set of monthly macroeconomic variables. In the first stage, we estimate the long-term volatility of BIST100 index using GARCH-MIDAS (Mixed Data Sampling) method. Subsequently, we examine the relationship between the long-term volatility component and interest rate, USD/TL exchange rate, inflation rate, CDS premium, real sector confidence index and the volatility of S&P500 index using an autoregressive distributed lag (ARDL) model. Empirical results suggest that the most significant macroeconomic variable affecting the long-run volatility of BIST100 index is the exchange rate. Also, we show that the long-run volatility of BIST100 index is positively associated with both CDS premium and the volatility of S&P500. Finally, we find that an increase in real sector confidence index leads to a decrease in the long-run component of the BIST100 index volatility.

Keywords: Stock Market; Volatility; Macroeconomy; MIDAS; ARDL; BIST100 (search for similar items in EconPapers)
JEL-codes: C22 C58 G10 (search for similar items in EconPapers)
Date: 2019
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