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Examining the Dynamics of Macroeconomic Indicators and Banking Stock Returns with Bayesian Networks

Author

Listed:
  • Hatipoglu, Fatma Busem

    (Mugla Sitki Kocman University)

  • Uyar, Umut

    (Pamukkale University)

Abstract

According to the modern portfolio theory, the direction of the relationship between the securities in the portfolio is stated to be effective in reducing the risk. Moreover, securities in high correlation are avoided by taking place in the same portfolio. The models structured by the Bayesian networks are capable of visually illustrate the probabilistic relationship. Also, portfolio returns could be refreshed simultaneously when new information has arrived. The study aims to provide dynamic information through Bayesian networks and to investigate the relationship between macroeconomic indicators and stock returns of Turkish major bank stocks based on the Arbitrage Pricing Model. The dataset includes stock returns of four banks listed in the Borsa Istanbul from June 2001 to January 2017. Besides, macroeconomic variables such as BIST-100 Index, oil prices, inflation, exchange, and interest rate & money supply are gathered for the same period. The results suggest that the Bayesian network models allow dynamics among stock returns could be investigated in more detail. Additionally, it determines that macroeconomic variables would have various impacts on stock returns on bank stocks by comparison of the conventional methods.

Suggested Citation

  • Hatipoglu, Fatma Busem & Uyar, Umut, 2019. "Examining the Dynamics of Macroeconomic Indicators and Banking Stock Returns with Bayesian Networks," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 10(4), pages 807-822, July.
    • Handle: RePEc:ris:buecrj:0424
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    More about this item

    Keywords

    Arbitrage Pricing Model; Bayesian Networks; Machine Learning; Portfolio Selection Theory; Banking Stocks;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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