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The Determinants of Stock Market Index: VAR Approach to Turkish Stock Market

Author

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  • Esref Savas BASCI

    (Department of Business Administration, Hitit University, Turkey)

  • S leyman Serdar KARACA

    (Department of Business Administration, Gaziosmanpasa University, Turkey.)

Abstract

In this paper, we examined the relationship between ISE 100 Index and a set of four macroeconomic variables using Vector Autoregressive (VAR) model. Variables we used in our model are Exchange, Gold, Import, Export and ISE 100 Index. ISE 100 Index is a dependent variable and the others are independent variables. In this study we used 190 observations for the sample period from January, 1996 to October, 2011. All variables have seasonal movements. After seasonal adjustments, all series have had stationary in their first difference. After determining optimal lag order, it was given one standard deviation shock for each series and their response. And in variance decomposition carried out subsequently, it has been determined that especially as of the second default of exchange, it was explained 31% by share indices.

Suggested Citation

  • Esref Savas BASCI & S leyman Serdar KARACA, 2013. "The Determinants of Stock Market Index: VAR Approach to Turkish Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 163-171.
    • Handle: RePEc:eco:journ1:2013-01-16
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    References listed on IDEAS

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    1. Gjerde, Oystein & Saettem, Frode, 1999. "Causal relations among stock returns and macroeconomic variables in a small, open economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(1), pages 61-74, January.
    2. Lee, Bong-Soo, 1992. "Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation," Journal of Finance, American Finance Association, vol. 47(4), pages 1591-1603, September.
    3. Purna Chandra Padhan, 2007. "The nexus between stock market and economic activity: an empirical analysis for India," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 34(10), pages 741-753, September.
    4. Fangxiong Gong & Roberto Mariano, 1997. "Stock Market Returns and Economic Fundamentals in an Emerging Market: The Case of Korea," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 4(2), pages 147-169, May.
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    Cited by:

    1. William Sucuahi & Eugene Bije, 2020. "Modeling Long-Term Relationships in Philippine Stock Market (PSE) Indices: A Cointegration Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(9), pages 989-998, September.
    2. Shahbaz, Muhammad & Ur Rehman, Ijaz & Zainudin, Rozaimah, 2013. "Macroeconomic Determinants of Stock Market Capitalization in Pakistan:Fresh Evidence from Cointegration with unknown Structural breaks," MPRA Paper 52490, University Library of Munich, Germany, revised 24 Dec 2013.
    3. Thuy Thu Nguyen & Hong Thi Mai & Tram Thi Minh Tran, 2020. "Monetary Policy and Stock Market Returns: Evidence from ARDL Bounds Testing Approach for the Case of Vietnam," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 758-777, July.
    4. Anthony E. Ageme, 2020. "“Impact of Selected Macroeconomic Variables on Stock Market Development and Banking System Liquidity in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(7), pages 107-112, July.

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    More about this item

    Keywords

    Macroeconomic Variables; VAR Model; Impulse Response Analysis; Variance Decomposition; Turkey;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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