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The Analysis of Relationship between the Rate of Stock Return and Interest Rate with Nonlinear Methods: The Case of Turkey

Author

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  • Ekrem Akbas, Yusuf

    (Adiyaman University,)

Abstract

In this study, it was analyzed the structure of stationary of Istanbul Stock Exchange return rate and interest rate series and whether it’s are linear in the period of 1986:01-2012:07. It was used linearity and unit root tests developed by Caner and Hansen (2002). As a result of these tests, it was concluded that the series are non-linear and both of series have two regimes. Besides, it was concluded that both of two regimes have unit root in the series of interest rate and first regime has stationary, second regime has also unit root in Istanbul Stock Exchange return rate series. Finally, the model in which Istanbul Stock Exchange is dependent variable, interest rate is explanatory variable was analyzed whether there is a co integration with Hansen-Seo (2002) test. As a result of analysis it was determined the co integration relationship between the interest rate and Istanbul Stock Exchange return rate.

Suggested Citation

  • Ekrem Akbas, Yusuf, 2013. "The Analysis of Relationship between the Rate of Stock Return and Interest Rate with Nonlinear Methods: The Case of Turkey," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 4(3), pages 1-21, July.
    • Handle: RePEc:ris:buecrj:0124
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    Cited by:

    1. Phiri, Andrew, 2017. "Has the South African Reserve Bank responded to equity prices since the sub-prime crisis? An asymmetric convergence approach," MPRA Paper 76542, University Library of Munich, Germany.
    2. Andrew Phiri, 2018. "Has the South African Reserve Bank responded to equity returns since the sub-prime crisis? An asymmetric convergence approach," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 10(3), pages 205-225.

    More about this item

    Keywords

    Stock Return Rate; Interest Rate; Non-linearity; Non-Linear Unit Root Test; Non-Linear Cointegration Test; Turkey.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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