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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: Macroeconomic Fundamentals of Turkey Stock Market Volatility
Author(s): Huseyin Tastan, Arifenur Gungor
Volume: 10
Number: 4
Year: 2019
Page: 823-832
ISSN: 2619-9491
DOI Number: 10.20409/berj.2019.203
Abstract
The aim of this study is to investigate the relationship between the slowly moving long-run component of daily volatility of Turkish stock market and a set of monthly macroeconomic variables. In the first stage, we estimate the long-term volatility of BIST100 index using GARCH-MIDAS (Mixed Data Sampling) method. Subsequently, we examine the relationship between the long-term volatility component and interest rate, USD/TL exchange rate, inflation rate, CDS premium, real sector confidence index and the volatility of S&P500 index using an autoregressive distributed lag (ARDL) model. Empirical results suggest that the most significant macroeconomic variable affecting the long-run volatility of BIST100 index is the exchange rate. Also, we show that the long-run volatility of BIST100 index is positively associated with both CDS premium and the volatility of S&P500. Finally, we find that an increase in real sector confidence index leads to a decrease in the long-run component of the BIST100 index volatility.

Keywords: Stock Market, Volatility, Macroeconomy, MIDAS, ARDL, BIST100

JEL Classification: C22, C58, G10

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