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Re-testing for financial integration of the Turkish Stock Market and the US Stock Market: An Evidence from co-integration and error correction models

Author

Listed:
  • Turgut Tursoy

    (Near East University, Department of Banking and Finance, Nicosia, North Cyprus)

  • Faisal Faisal

    (Near East University, Department of Banking and Finance, Nicosia, North Cyprus)

Abstract

This paper investigates financial market integration among U.S. stock market and Turkish stock market using monthly data for the period of 1989 to 2015. The purpose of this article is to examine whether share prices of two countries showing a common trend. Using cointegration analysis, the study provides empirical evidence of common trends among for US and Turkey stock markets. The empirical results of the study highlighted that Turkish and US stock markets are strongly cointegrated and moving together in the long run. Furthermore, the results of Granger causality test confirm the absence of weak causality. However, a uni-directional (strong Granger causality) was found from US stock market to Turkish stock market. The confirmation of significant error correction term also implies the evidence of a long-run relationship. The findings of the study suggested that Turkish stock market which is the local market is strongly integrated with the US stock market. The reliability and stability of the estimations are confirmed by diagnostic checks and CUSUM test.

Suggested Citation

  • Turgut Tursoy & Faisal Faisal, 2017. "Re-testing for financial integration of the Turkish Stock Market and the US Stock Market: An Evidence from co-integration and error correction models," Romanian Statistical Review, Romanian Statistical Review, vol. 65(2), pages 43-55, June.
    • Handle: RePEc:rsr:journl:v:65:y:2017:i:2:p:43-55
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    Citations

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    Cited by:

    1. Muhammad Hanif & Ariba Sabah, 2020. "Stock Markets’ Integration in Post Financial Crisis Era: Evidence from Literature," Capital Markets Review, Malaysian Finance Association, vol. 28(2), pages 43-71.
    2. Osabuohien-Irabor Osarumwense & Julian I. Mbegbu, 2017. "Power and Size analysis of Co-integration tests in Conditional Heteroskedascity: A Monte Carlo Simulation," Romanian Statistical Review, Romanian Statistical Review, vol. 65(3), pages 17-34, September.
    3. Turgut Tursoy, 2019. "The interaction between stock prices and interest rates in Turkey: empirical evidence from ARDL bounds test cointegration," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-12, December.
    4. Chen, Fu & Tiwari, Sunil & Mohammed, Kamel Si & Huo, Weidong & Jamróz, Paweł, 2023. "Minerals resource rent responses to economic performance, greener energy, and environmental policy in China: Combination of ML and ANN outputs," Resources Policy, Elsevier, vol. 81(C).
    5. Tursoy, Turgut, 2018. "Risk management process in banking industry," MPRA Paper 86427, University Library of Munich, Germany.
    6. Irfan, Muhammad & Abdur Rehman, Mubeen & Liu, Xuemei & Razzaq, Asif, 2022. "Interlinkages between mineral resources, financial markets, and sustainable energy sources: Evidence from minerals exporting countries," Resources Policy, Elsevier, vol. 79(C).

    More about this item

    Keywords

    Financial integration; Cointegration; Granger Causality; Stock price;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G1 - Financial Economics - - General Financial Markets

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