 Macroeconomic factors and equity returns in Borsa İstanbulYigit Atilgan,
K.Özgür Demi̇rtaş and
Alper Erdoğan
Iktisat Isletme ve Finans, 2015, vol. 30, issue 349, 09-30 Abstract: This paper investigates equity return exposure to various macroeconomic factors and the performance of factor betas in predicting the cross-sectional variation in stock returns. We utilize a two-step procedure to directly test the implications of the Arbitrage Pricing Theory. First, we calculate monthly factor betas and then, we estimate the sensitivity of equity returns towards the factor betas. We find that (i) there exists a negative and significant relation between interest rate betas and future equity returns; (ii) the inclusion of market, book-to-market, size and momentum factor betas does not subsume the predictive power of the interest rate beta; and (iii) these results are driven by the debt-to-equity ratios of individual firms. We conclude that the sensitivity of returns towards interest rates which is driven by financial leverage is a priced risk factor in the Turkish stock market. Keywords: Asset Pricing Models; Equity Returns; Arbitrage Pricing Theory; Macroeconomic Factors. (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:iif:iifjrn:v:30:y:2015:i:349:p:09-30 Ordering information: This journal article can be ordered from Access Statistics for this article Iktisat Isletme ve Finans is currently edited by Ali Bilge More articles in Iktisat Isletme ve Finans from Bilgesel Yayincilik |
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