The Impact of the Exchange Rate Volatility on Stock Markets Dynamics in Tunisia and Turkey: An Artificial Neural Network Analysis

Nesrine Mechri (), Christian de Peretti () and Salah Ben Hamad
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Nesrine Mechri: UR CONFLUENCE : Sciences et Humanités (EA 1598) - UCLy - UCLy (Lyon Catholic University), ESDES - ESDES, Lyon Business School - UCLy - UCLy - UCLy (Lyon Catholic University)
Christian de Peretti: ECL - École Centrale de Lyon - Université de Lyon, LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Salah Ben Hamad: Université de Sfax - University of Sfax

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Abstract: The present research provides an overview of links between exchange rate volatility and the dynamics of stock market returns in order to identify the influence of several macroeconomic variables on the volatility of stock markets, useful for political decision makers as well as investors to better control the portfolio risk level. More precisely, this research aims to identify the impact of exchange rate volatility on the fluctuations of stock market returns, considering two countries that belong to the Middle East and North Africa (MENA) zone: Tunisia and Turkey. Previous works in the literature used very specified and short periods of study, many important variables were neglected, and most of the earlier research was concentrated on the developed countries. In this research, we integrate several control variables of stock market returns that have not been simultaneously studied before. In addition, we spread out our research period up to 15 years including many events and dynamics. Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and multiple regression models are first employed. Then, an Artificial Neural Network (ANN) is used and compared with the results of the multiple regression. Hence, the results show that for both Tunisia and Turkey, exchange rate volatility has a significant effect on stock market fluctuations.

Keywords: volatility; exchange rate; MENA; Stock market return; GARCH; artificial neural network (search for similar items in EconPapers)
Date: 2021-12-09
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Published in Global Economics Science, 2021, pp.1-21. ⟨10.37256/ges.312022798⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04875478

DOI: 10.37256/ges.312022798

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