Investigation of the Relationship between Economic and Political Uncertainty and General Economic Outlook: An Econometric Analysis on Athens Stock Exchange

Year 2020, , 73 - 104, 30.06.2020

Mustafa Özyeşil

https://doi.org/10.31679/adamakademi.686464

Abstract

In this study, the relationship between economic and political uncertainties in Greece and price movements of the Athens Stock Exchange and its volatility are examined through 19 econometric models calculated by using the Chowdhury (1993) volatility calculation method. Panel data analysis is conducted. Kapetanios (2005) structural break unit root test is performed, and it is observed that series are stationary at different levels. The bounds testing approach developed by Pesaran et al. (2001) is applied to detect cointegration between the series. To find out structural breaking dates that are critical and affect the performance of stock exchange, Bai-Perron (2003) multiple structural change method is performed by using dummy variables. In the long-term analysis, a negative relationship between the political and economic uncertainty indicators in Greece and the Athens Stock Exchange Index is determined. Uncertainties in tax policies (EPUT), economic uncertainties (EU) and uncertainties in banking policies (EPUB) are determined factors as having the most impact on the stock exchange. In the short-term analysis, it is observed that the uncertainties in question are also effective on the Athens Stock Exchange Index, but they did not have a significant effect on the price volatility of the stock exchange.

Keywords

Greek Economy, Athens Stock Exchange Index, Volatility in Athens Stock Exchange Index, Uncertainties in Economic Policies, Structural Break Analysis, Boundary Test, ARDL

Ekonomik ve Politik Belirsizlikler ile Genel Ekonomik Görünüm Arasındaki İlişkinin İncelenmesi: Atina Menkul Kıymetler Borsası Üzerine Ekonometrik Bir Analiz

Abstract

Bu çalışmada, Yunanistan'daki ekonomik ve politik belirsizlikler ile Atina Menkul Kıymetler Borsası'nın fiyat hareketleri ve oynaklığı arasındaki ilişki, Chowdhury (1993) oynaklık hesaplama yöntemi kullanılarak hesaplanan 19 ekonometrik model ile incelenmiştir. Çalışmada panel veri analizi yapılmıştır. Analizde ilk olarak Kapetanios (2005) yapısal kırılma ünitesi kök testi yapılmış ve serilerin farklı seviyelerde durağan olduğu görülmüştür. Seriler arasındaki eşbütünleşmeyi tespit etmek için Pesaran ve ark. (2001) tarafından geliştirilen Sınır Testi yöntemi uygulanmıştır. Atina Borsasının performansını etkileyen yapısal kırılma tarihlerini tespit etmek amacıyla kukla değişkenler kullanılarak Bai-Perron (2003) çoklu yapısal değişim yöntemi uygulanmıştır. Uzun vadeli analizde, Yunanistan'daki siyasi ve ekonomik belirsizlik göstergeleri ile Atina Menkul Kıymetler Borsası Endeksi arasında negatif bir ilişki belirlenmiştir. Vergi politikalarındaki belirsizlikler (EPUT), ekonomik belirsizlikler (EU) ve bankacılık politikalarındaki belirsizlikler (EPUB) borsa üzerinde en fazla etkiye sahip göstergeler olarak belirlenmiştir. Kısa vadeli analizde, söz konusu belirsizliklerin kısa vadede Atina Menkul Kıymetler Borsası Endeksi'nde de etkili olduğu, ancak borsaların fiyat oynaklığı üzerinde önemli bir etkiye sahip olmadıkları görülmektedir.

Keywords

Yunanistan Ekonomisi, Atina Borsa Endeksi, Atina Borsa Endeksindeki Oynaklık, Ekonomi Politikalarındaki Belirsizlikler, Yapısal Kırılmalı Analiz, Sınır Testi, ARDL

References

• ADVFN. (2020). ATHEX Composite Share. GD Historical Prices: https://www.advfn.com/stock-market/ASI/GD/historical/more-historical-data?current=16&Date1=01/01/09&Date2=01/20/20, [22.01.2020].
• Arı, A. & Ozcan, B. (2015). The Stationarity of Consumption-Income Ratio: Evidence from Turkey. Hacettepe University Journal of Economics and Administrative Sciences, 33(3), 23-46.
• Asteriou, D. & Sarantidis, A. (2016). Political Instability and Stock Market Return: Evidence from OECD Countries. Economics and Business Letters, 5(4), 113 - 124.
• Bai, J. & Perron, P. (2003). Computation and Analysis of Multiple Structural Change Models. Journal of Applied Econometrics, 18, 1-22.
• Baker, S R., Bloom, N. & Davis, S. J. (2016). Measuring Economic Policy Uncertainty. The Quarterly Journal of Economics, 131(4), 1593–1636.
• Belloumi, M. (2014). The Relationship between Trade, FDI and Economic Growth in Tunisia: An Application of Autoregressive Distributed Lag Model. Economic Systems, 38(2), 269-287.
• Chowdhury, A. R. (1993). Does Exchange Rate Volatility Depress Trade Flows? Evidence from Error Correction Models. The Review of Economics and Statistics, 75(4), 700–706.
• Clements, J. (2019). The Error-Correction Model for Co-integrated Time Series (and checking parameter stability): https://towardsdatascience.com/the-error-correction-model-for-co-integrated-time-series-and-checking-parameter-stability-a60bbdafb9e4 [30.01.2020].
• Dash, S. R., Maitra, D., Debeta, B. & Mahakud, J. (2019). Economic policy uncertainty and stock market liquidity: Evidence from G7 countries. International Review of Finance, 1-16. DOI: 10.1111/irfi.12277
• Engle, R. F., & Granger, C. W. J. (1987). Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica: Journal of the Econometric Society, 55(2), 251-276.
• Sahinoz, S., & Cosar, E. E. (2018). Quantifying uncertainty and identifying its impacts on the Turkish economy. Empirica, 47, 365-387.
• Gilal, M. (2019). Economic Policy Uncertainty and Stock Market Returns in Indonesia. DOI: 10.13140/RG.2.2.10905.88168
• Granger, C. W., J. & Newbold, P. (1974). Spurious Regressions in Econometrics. Journal of Econometrics, 2(2), 111 – 120.
• Guterres, A. (2020). World Economic Situation Prospects 2020. United Nations Conference on Trade and Development: https://unctad.org/en/PublicationsLibrary/wesp2020_en.pdf [16.05.2020].
• Hardouvelis, G., Karalas, G., Karanastasis, D., & Samartzis, P. (2018). Economic Policy Uncertainty, Political Uncertainty, and the Greek Economic Crisis: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3155172 [22.01.2020].
• Hardouvelis, G., Karalas, G., Karanastasis, D. and Samartzis, P. (2019). Uncertainty Indices for Greece: http://hardouvelis.gr/hkks-uncertainty-indices-for-greece [22.01.2020].
• Hatipoglu, M., & Sekmen, T. (2018). The Impacts of Some Selected Risk Factors on Islamic Stock Markets. MANAS Journal of Social Studies, 7(4), 231-240.
• Hoque, M. E., & Zaidi, M. A. S. (2019). The Impacts of Global Economic Policy Uncertainty on Stock Market Returns in Regime Switching Environment: Evidence from Sectoral Perspectives. International Journal of Finance & Economics, 24(2), 991-1016.
• Johnston, J., & Dinardo, J. (1997). Econometric Methods. (Fourth Edition), McGraw-Hill Companies, United States.
• Kapetanios, G. (2005). Unit-Root Testing Against the Alternative Hypothesis of Up to m Structural Breaks. Journal of Time Series Analysis, 26(1), 123-133.
• Karacaer Ulusoy, M., & Pirgaip, B. (2019). The Casual Relationship between Economic Policy Uncertainty and Stock Market Returns. Journal of Atatürk University Social Science Institute, 23(December Special Issue), 2239-2251.
• Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. Macmillan Cambridge University Press, for Royal Economic Society in 1936.
• Knight, F. (1921). Risk, Uncertainty, and Profit. University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship: https://ssrn.com/abstract=1496192 [22.01.2020].
• Li, Y., Ma, F., Zhang, Y., & Xiao, Z. (2019). Economic policy uncertainty and the Chinese stock market volatility: new evidence. Applied Economics, 51(49), 5398-5410. DOI: 10.1080/00036846.2019.1613507
• Li, X. L., Balcilar, M., Gupta, R., & Chang, T. (2016) The Causal Relationship Between Economic Policy Uncertainty and Stock Returns in China and India: Evidence from a Bootstrap Rolling Window Approach. Emerging Markets Finance and Trade, 52(3), 674-689. DOI: 10.1080/1540496X.2014.998564
• Li, R., Li, S., Yuan, D., & Yu, K. (2020) Does Economic Policy Uncertainty in the U.S. Influence Stock Markets in China and India? Time-Frequency Evidence. Applied Economics, 1-17. DOI: 10.1080/00036846.2020.1734182
• Liu, L., & Zhang, T. (2015). Economic policy uncertainty and stock market volatility. Finance Research Letters, 15, 99-105.
• MFA. (2019). Greece Economy: http://www.mfa.gov.tr/yunanistan-ekonomisi.tr.mfa [25.01.2020]
• Moore, A. (2017). Measuring economic uncertainty and its effects. Economic record, 93(303), 550-575.
• Pesaran, H. M., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16(3), 289 - 326.
• Sevim, C., & Dogan, T. T. (2016). Export and Exchange Rate Volatility Relationship in Turkish Economy. Ege Academic Review, 16(2), 303- 318.
• Sum, V. (2012). The ASEAN Stock Market Performance and Economic Policy Uncertainty in the United States. Economic Papers: A Journal of Applied Economics and Policy, 32(4), 512-521.
• Tarı, R., & Yildirim, D. Ç. (2009). The Effects of Exchange Rate on Export: An Analysis for Turkey. Journal of Management and Economics, 16(2), 95-105.
• UNCTAD. (2009). The Global Economic Crisis: Systemic Failures and Multilateral Remedies. United Nations Publications.