American Journal of Theoretical and Applied Business

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Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey

Received: Jul. 05, 2019    Accepted: Aug. 09, 2019    Published: Sep. 24, 2019
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Abstract

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.

DOI 10.11648/j.ajtab.20190502.13
Published in American Journal of Theoretical and Applied Business ( Volume 5, Issue 2, June 2019 )
Page(s) 40-46
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Stock Markets Volatility, Asymmetric GARCH Models, VAR Model

References
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[4] Ding, Z., Granger, C. W. J., & Engle R. F. (1993). A Long Memory Property of Stock Market Returns and a New Model, Journal of Empirical Finance, 1, 83-106.
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[7] Glosten, L., Jagannathan, R., Runkle, D. (1993), Relationship between the expected value and volatility of the nominal excess returns on stocks. Journal of Finance, 48, 1779-1802.
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[11] Lıljeblom, E., Stenius, M., “Macroeconomic Volatility and StockMarket Volatility: Empirical Evidence on Finnish Data”, Applied Financial Economics, 7, 1997, s. 419-426.
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[14] Muradoğlu, F., “An Empirical Investigation of Stock Returns andDeterminants of Risk in an Emerging Market: GARCH-Mmodeling at ISE”, Multinational Finance Journal, 3, 1999, s. 223252.
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[16] Payaslıoğlu, C., “Testing Volatility Asymmetry in Istanbul StockExchange” ISE Review, 5, 2001, s. 1-11. Schwert, G. W., “Why Does Stock Market Volatility Change OverTime?”, Journal of Finance, 44, 1989, s. 1115-1153.
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[19] Tarı, R. (2006). Ekonometri. İstanbul: Avcı Ofset, 4. Baskı.
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    Tuğba Dayıoğlu, Yılmaz Aydın. (2019). Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey. American Journal of Theoretical and Applied Business, 5(2), 40-46. https://doi.org/10.11648/j.ajtab.20190502.13

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    ACS Style

    Tuğba Dayıoğlu; Yılmaz Aydın. Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey. Am. J. Theor. Appl. Bus. 2019, 5(2), 40-46. doi: 10.11648/j.ajtab.20190502.13

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    AMA Style

    Tuğba Dayıoğlu, Yılmaz Aydın. Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey. Am J Theor Appl Bus. 2019;5(2):40-46. doi: 10.11648/j.ajtab.20190502.13

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  • @article{10.11648/j.ajtab.20190502.13,
      author = {Tuğba Dayıoğlu and Yılmaz Aydın},
      title = {Relationship Between the Volatility of Stock Returns and the Volatility of Macroeconomic Variables: A Case of Turkey},
      journal = {American Journal of Theoretical and Applied Business},
      volume = {5},
      number = {2},
      pages = {40-46},
      doi = {10.11648/j.ajtab.20190502.13},
      url = {https://doi.org/10.11648/j.ajtab.20190502.13},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ajtab.20190502.13},
      abstract = {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.},
     year = {2019}
    }
    

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    AU  - Tuğba Dayıoğlu
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    AB  - 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.
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