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The Turkish Stock Market Integration with Developed and Emerging Countries' Stock Markets: Evidence from Cointegration Tests with and without Regime Shifts

Author

Listed:
  • Kasman Adnan

    (Dokuz Eylul University)

  • Vardar Gülin

    (Izmir University of Economics)

  • Okan Berna

    (Izmir University of Economics)

  • Aksoy Gökçe

    (Izmir University of Economics)

Abstract

This paper examines the existence of integration between the Turkish stock market and the markets in some developed and emerging countries, using both the conventional Engle and Granger (1987) cointegration test and the Gregory and Hansen (1996) test, which allows a structural break in the cointegration vector. The conventional test suggests that there is no long-run relationship between the Turkish stock market and any of the sample countries' stock markets. The results from the Gregory and Hansen (1996) test, however, suggest that the Turkish stock market is cointegrated with the markets in the sample. Moreover, the error correction version of the ARDL model, which takes the structural break dates into account, is also used to specify the short-run and long-run dynamics of the stock prices. The results indicate that the speed of adjustment is especially higher in the cases of major trading partners of Turkey (i.e., France, Germany, and the UK). The presence of these equilibrium relations could also be attributed to the growing exposure of the Turkish stock market to foreign capital flows since late 1980's.

Suggested Citation

  • Kasman Adnan & Vardar Gülin & Okan Berna & Aksoy Gökçe, 2009. "The Turkish Stock Market Integration with Developed and Emerging Countries' Stock Markets: Evidence from Cointegration Tests with and without Regime Shifts," Review of Middle East Economics and Finance, De Gruyter, vol. 5(1), pages 24-49, May.
    • Handle: RePEc:bpj:rmeecf:v:5:y:2009:i:1:n:2
    DOI: 10.2202/1475-3693.1120
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