Cointegration and Causality Between Macroeconomic Variables and Share Prices

Omer Yilmaz, Bener Gungor and Vedat Kaya

Istanbul Stock Exchange Review, 2007, vol. 9, issue 34, 1-16

Abstract: The aim of this study is to investigate whether there is a relationship between some macroeconomic variables and share prices. In the analysis, covering the period of 1990: 01-2003: 12, variables of Istanbul Stock Exchange index, consumer price index, money supply, interest rate, exchange rate, trade balance, and industrial production index were used. Least squares estimation method, Johansen-Jeselius cointegration test, Granger causality test and variance decomposition results produced by VEC model were used in the study. These analysis shows that there is a long run relationship between some macroeconomic variables and share prices.

Date: 2007
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