Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey
American Journal of Theoretical and Applied Business
Volume 5, Issue 2, June 2019, Pages: 40-46
Received: Jul. 5, 2019; Accepted: Aug. 9, 2019; Published: Sep. 24, 2019
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Tuğba Dayıoğlu, Department of Economics and Finance, Nısantası Unıversıty, Istanbul, Turkey
Yılmaz Aydın, Department of Economics, Nısantası Unıversıty, Istanbul, Turkey
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In this paper, we examined the relationship between BIST-100 Index (SPI) and a set of macroeconomic variables volatility using Vector Autoregressive (VAR) model. The relationship between the stock market and macroeconomic variables has been subjected to serious economic research. A stock market plays important role for the reallocation of funds in many sectors of an economy. The macroeconomic factors make investors to choose the stock because investors are interested to know about the factors affecting the working of stock to manage their portfolios. Some investors show the stock prices volatility is based on directional trend in the stock prices but actually volatility is amount of fluctuation in stock prices. For this purpose we used the volatility of the variables. This study period 2006-2018 stock market using monthly data for Turkey is to examine the relationship between stock return volatility and macroeconomic volatility. We used the macroeconomic variables volatility these are industrial production (IP), money supply (M1), inflation rate (CPI), US dollar equivalent exchange rate (EX) and oil prices (OIL). We used montly data for the period between january 2006 and december 2018. Asymmetric GARCH models are used for the series volatility. The best performing GARCH model in these models are considered as volatlity. Exchange rate and industrial production index have an important effect on stock market volatility.
Stock Markets Volatility, Asymmetric GARCH Models, VAR Model
To cite this article
Tuğba Dayıoğlu, Yılmaz Aydın, Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey, American Journal of Theoretical and Applied Business. Vol. 5, No. 2, 2019, pp. 40-46. doi: 10.11648/j.ajtab.20190502.13
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