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Long Run Relationships between Stock Market Returns and Macroeconomic Performance: Evidence from Turkey

Author

Listed:
  • Osman Karamustafa

    (Ondokuz Mayis University)

  • Yakup Kucukkale

    (Karadeniz Technical University)

Abstract

The purpose of this study is to investigate whether current economic activities in Turkey have explanatory power over stock returns, or not. The data used in this study are monthly stock price indexes of Istanbul Stock Exchange and a set of macroeconomic variables, including money supply, exchange rate of US Dollar, trade balance, and the industrial production index. Engel-Granger and Johansen-Juselius co-integration tests and Granger Causality test were used in the study to explain the long-run relations among variables questioned. Obtained results illustrate that stock returns is co-integrated with a set of macroeconomic variables by providing a direct long-run equilibrium relation. However, the macroeconomic variables are not the leading indicators for the stock returns, because any causal relation from macroeconomic variables to the stock returns can not be determined in sample period. Contrarily, stock returns is the leading indicator for the macroeconomic performance for the Turkish case by supporting emerging market issues.

Suggested Citation

  • Osman Karamustafa & Yakup Kucukkale, 2003. "Long Run Relationships between Stock Market Returns and Macroeconomic Performance: Evidence from Turkey," Finance 0309010, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0309010
    Note: Type of Document - Acrobat PDF; prepared on MSWordXP; to print on Acrobat PDF; pages: 8 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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    References listed on IDEAS

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    Cited by:

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    2. Ante Dodig, 2020. "Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 23(2), pages 55-88, November.
    3. Dodig,Ante, 2020. "Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries," Policy Research Working Paper Series 9323, The World Bank.
    4. Dorra Zouari & Achraf Ghorbel & Sonia Ghorbel-Zouari & Younes Boujelbène, 2014. "Volatility spillovers and dynamic correlation between liquidity risk factors in Tunisian banks," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 6(1), pages 1-26.
    5. Athambawa Jahfer & Abdul Hameed Mulafara, 2016. "Dividend policy and share price volatility: evidence from Colombo stock market," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 8(2), pages 97-108.
    6. Prempeh, Kwadwo Boateng, 2016. "Macroeconomic Variables and Stock Price Volatility in Ghana," MPRA Paper 70545, University Library of Munich, Germany.

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    More about this item

    Keywords

    Stock Returns Macroeconomic Performance Emergency Market Cointegration Causality;

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets

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