Determinants of Financial vs. Non Financial Stock Returns: Evidence from Istanbul Stock Exchange

Mustafa Caglayan () and Fatma Lajeri ()

No 2009007, Working Papers from The University of Sheffield, Department of Economics

Abstract: We estimate a four-factor model for a sample of financial and nonfinancial firms traded on the Istanbul Stock Exchange (ISE). The factors relate to market return, interest, inflation and exchange rates. By investigating the effects of these factors simultaneously for different exchange rate regimes, we show that market return, interest, inflation, and exchange rates play a separate role in financial and nonfinancial firms´ stock returns. We also show that all factors are priced during the period of free float. These results are important for determining financial institutions' cost of capital and for identifying the risks that should be hedged.

Keywords: Interest rate risk; Inflation risk; Foreign exchange risk (search for similar items in EconPapers)
JEL-codes: F23 F31 G21 G28 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-04, Revised 2009-04
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2009007

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