Research Article
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Evaluating the asymmetric effects of production, interest rate and exchange rate on the Turkish stock prices.

Year 2019, Volume: 19 Issue: 2, 293 - 300, 30.04.2019
https://doi.org/10.21121/eab.556344

Abstract

The relationship between stock prices and macro variables has been studied exhaustively
in the literature. However, most of the studies assume that this relationship
is linear. In this paper, we evaluate the asymmetric effects of production, the
interest rate and the exchange rate on Turkish stock prices using non-linear
autoregressive distributed lags models. We find that there are both long-run
and short-run asymmetric relationships between macro variables and Turkish
stock prices. Our results indicate that non-linear models can yield more
plausible results compare to linear models.
The relationship between stock prices and macro variables has been studied exhaustively
in the literature. However, most of the studies assume that this relationship
is linear. In this paper, we evaluate the asymmetric effects of production, the
interest rate and the exchange rate on Turkish stock prices using non-linear
autoregressive distributed lags models. We find that there are both long-run
and short-run asymmetric relationships between macro variables and Turkish
stock prices. Our results indicate that non-linear models can yield more
plausible results compare to linear models. 

 

References

  • Ang, A., & Piazzesi, M. (2003) “A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables” Journal of Monetary Economics, 50(4), 745-787. Bahmani-Oskooee, M., & Saha, S. (2015) “On the relation between stock prices and exchange rates: a review article” Journal of Economic Studies, 42(4), 707-732. Bahmani-Oskooee, M., & Saha, S. (2016) “Do exchange rate changes have symmetric or asymmetric effects on stock prices?” Global Finance Journal, 31, 57-72. Bahmani-Oskooee, M., & Saha, S. (2018) “On the relation between exchange rates and stock prices: a non-linear ARDL approach and asymmetry analysis” Journal of Economics and Finance, 42(1), 112-137. Bodurtha Jr, J. N., Cho, D. C., & Senbet, L. W. (1989) “Economic forces and the stock market: An international perspective” Global Finance Journal, 1(1), 21-46. Bonga-Bonga, L., & Makakabule, M. (2010) “Modeling stock returns in the South African stock exchange: A nonlinear approach” European Journal of Economics, Finance and Administrative Sciences, 19, 168-177. Bredin, D., Hyde, S. & O’Reilly, G. (2008) “Regime changes in the relationship between stock returns and the macroeconomy” British Accounting Association Annual Conference, 1-25. Cheah, S. P., Yiew, T. H., & Ng, C. F. (2017) “A nonlinear ARDL analysis on the relation between stock price and exchange rate in Malaysia” Economics Bulletin, 37(1), 336-346. Chen, N. F., Roll, R., & Ross, S. A. (1986) “Economic forces and the stock market” Journal of Business, 59 (3), 383-403. Cheung, Y. W., & Ng, L. K. (1998) “International evidence on the stock market and aggregate economic activity” Journal of Empirical Finance, 5(3), 281-296. Cuestas, J. C., & Tang, B. (2015) “Asymmetric exchange rate exposure of stock returns: Empirical evidence from Chinese Industries” The Sheffield Economic Research Paper Series No. 2015021. Erdoğan, L., & Tiryaki, A. (2018) “Asymmetric Effects of Macroeconomic shocks on the Stock Returns of the G-7 Countries: The Evidence from the NARDL Approach” Journal of Current Researches on Business and Economics, 8(1), 119-146. Fraser, P., & Groenewold, N. (2006) “US share prices and real supply and demand shocks” The Quarterly Review of Economics and Finance, 46(1), 149-167. Groenewold, N. (2004) “Fundamental share prices and aggregate real output” Applied Financial Economics, 14(9), 651-661. Guidolin, M., Hyde, S., McMillan, D., & Ono, S. (2009) “Non-linear predictability in stock and bond returns: When and where is it exploitable?” International Journal of Forecasting, 25(2), 373-399. Guidolin, M., & Ono, S. (2006) “Are the dynamic linkages between the macroeconomy and asset prices time-varying?” Journal of Economics and Business, 58(5), 480-518. Gürkaynak, R. S., & Wright, J. H. (2012) “Macroeconomics and the term structure” Journal of Economic Literature, 50(2), 331-367. Hiemstra, C., & Kramer, C. (1997) “Nonlinearity and endogeneity in macro-asset pricing” Studies in Nonlinear Dynamics & Econometrics, 2(3), 61-76. Huang, Y., & Guo, F. (2008) “Macro shocks and the Japanese stock market” Applied Financial Economics, 18(17), 1391-1400. Humpe, A., & Macmillan, P. (2009) “Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan” Applied Financial Economics, 19(2), 111-119. Kwon, C. S., & Shin, T. S. (1999) “Cointegration and causality between macroeconomic variables and stock market returns” Global Finance Journal, 10(1), 71-81. Lee, B. S. (1992) “Causal relations among stock returns, interest rates, real activity, and inflation” The Journal of Finance, 47(4), 1591-1603. Louis, R. J., & Eldomiaty, T. (2010) “How do stock prices respond to fundamental shocks in the case of the United States? Evidence from NASDAQ and DJIA” The Quarterly Review of Economics and Finance, 50(3), 310-322. Mannonen, P., & Oikarinen, E. (2013) “Risk premium, macroeconomic shocks, and information technology: an empirical analysis” International Review of Applied Economics, 27(5), 695-705. Maysami, R. C., & Koh, T. S. (2000) “A vector error correction model of the Singapore stock market” International Review of Economics & Finance, 9(1), 79-96. Mukherjee, T. K., & Naka, A. (1995) “Dynamic relations between macroeconomic variables and the Japanese stock market: an application of a vector error correction model” Journal of Financial Research, 18(2), 223-237. Nasseh, A., & Strauss, J. (2000) “Stock prices and domestic and international macroeconomic activity: a cointegration approach” The Quarterly Review of Economics and Finance, 40(2), 229-245. Peiró, A. (2016) “Stock prices and macroeconomic factors: Some European evidence” International Review of Economics & Finance, 41, 287-294. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001) “Bounds testing approaches to the analysis of level relationships” Journal of applied econometrics, 16(3), 289-326. Rapach, D. E. (2001) “Macro shocks and real stock prices” Journal of Economics and Business, 53(1), 5-26. Ross, S. A. (1976) “The arbitrage theory of capital asset pricing” Journal of Economic Theory, 13(3), 341–360. Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014) “Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework” In Festschrift in Honor of Peter Schmidt (pp. 281-314). Springer New York. Taylor, J. B. (1993) “Discretion versus policy rules in practice” Carnegie-Rochester Conference Series on Public Policy, 39, 195-214. CBRT. (2016) “Monetary and Exchange Rate Policy for 2017” Available from https://goo.gl/rSSBbi
Year 2019, Volume: 19 Issue: 2, 293 - 300, 30.04.2019
https://doi.org/10.21121/eab.556344

Abstract

References

  • Ang, A., & Piazzesi, M. (2003) “A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables” Journal of Monetary Economics, 50(4), 745-787. Bahmani-Oskooee, M., & Saha, S. (2015) “On the relation between stock prices and exchange rates: a review article” Journal of Economic Studies, 42(4), 707-732. Bahmani-Oskooee, M., & Saha, S. (2016) “Do exchange rate changes have symmetric or asymmetric effects on stock prices?” Global Finance Journal, 31, 57-72. Bahmani-Oskooee, M., & Saha, S. (2018) “On the relation between exchange rates and stock prices: a non-linear ARDL approach and asymmetry analysis” Journal of Economics and Finance, 42(1), 112-137. Bodurtha Jr, J. N., Cho, D. C., & Senbet, L. W. (1989) “Economic forces and the stock market: An international perspective” Global Finance Journal, 1(1), 21-46. Bonga-Bonga, L., & Makakabule, M. (2010) “Modeling stock returns in the South African stock exchange: A nonlinear approach” European Journal of Economics, Finance and Administrative Sciences, 19, 168-177. Bredin, D., Hyde, S. & O’Reilly, G. (2008) “Regime changes in the relationship between stock returns and the macroeconomy” British Accounting Association Annual Conference, 1-25. Cheah, S. P., Yiew, T. H., & Ng, C. F. (2017) “A nonlinear ARDL analysis on the relation between stock price and exchange rate in Malaysia” Economics Bulletin, 37(1), 336-346. Chen, N. F., Roll, R., & Ross, S. A. (1986) “Economic forces and the stock market” Journal of Business, 59 (3), 383-403. Cheung, Y. W., & Ng, L. K. (1998) “International evidence on the stock market and aggregate economic activity” Journal of Empirical Finance, 5(3), 281-296. Cuestas, J. C., & Tang, B. (2015) “Asymmetric exchange rate exposure of stock returns: Empirical evidence from Chinese Industries” The Sheffield Economic Research Paper Series No. 2015021. Erdoğan, L., & Tiryaki, A. (2018) “Asymmetric Effects of Macroeconomic shocks on the Stock Returns of the G-7 Countries: The Evidence from the NARDL Approach” Journal of Current Researches on Business and Economics, 8(1), 119-146. Fraser, P., & Groenewold, N. (2006) “US share prices and real supply and demand shocks” The Quarterly Review of Economics and Finance, 46(1), 149-167. Groenewold, N. (2004) “Fundamental share prices and aggregate real output” Applied Financial Economics, 14(9), 651-661. Guidolin, M., Hyde, S., McMillan, D., & Ono, S. (2009) “Non-linear predictability in stock and bond returns: When and where is it exploitable?” International Journal of Forecasting, 25(2), 373-399. Guidolin, M., & Ono, S. (2006) “Are the dynamic linkages between the macroeconomy and asset prices time-varying?” Journal of Economics and Business, 58(5), 480-518. Gürkaynak, R. S., & Wright, J. H. (2012) “Macroeconomics and the term structure” Journal of Economic Literature, 50(2), 331-367. Hiemstra, C., & Kramer, C. (1997) “Nonlinearity and endogeneity in macro-asset pricing” Studies in Nonlinear Dynamics & Econometrics, 2(3), 61-76. Huang, Y., & Guo, F. (2008) “Macro shocks and the Japanese stock market” Applied Financial Economics, 18(17), 1391-1400. Humpe, A., & Macmillan, P. (2009) “Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan” Applied Financial Economics, 19(2), 111-119. Kwon, C. S., & Shin, T. S. (1999) “Cointegration and causality between macroeconomic variables and stock market returns” Global Finance Journal, 10(1), 71-81. Lee, B. S. (1992) “Causal relations among stock returns, interest rates, real activity, and inflation” The Journal of Finance, 47(4), 1591-1603. Louis, R. J., & Eldomiaty, T. (2010) “How do stock prices respond to fundamental shocks in the case of the United States? Evidence from NASDAQ and DJIA” The Quarterly Review of Economics and Finance, 50(3), 310-322. Mannonen, P., & Oikarinen, E. (2013) “Risk premium, macroeconomic shocks, and information technology: an empirical analysis” International Review of Applied Economics, 27(5), 695-705. Maysami, R. C., & Koh, T. S. (2000) “A vector error correction model of the Singapore stock market” International Review of Economics & Finance, 9(1), 79-96. Mukherjee, T. K., & Naka, A. (1995) “Dynamic relations between macroeconomic variables and the Japanese stock market: an application of a vector error correction model” Journal of Financial Research, 18(2), 223-237. Nasseh, A., & Strauss, J. (2000) “Stock prices and domestic and international macroeconomic activity: a cointegration approach” The Quarterly Review of Economics and Finance, 40(2), 229-245. Peiró, A. (2016) “Stock prices and macroeconomic factors: Some European evidence” International Review of Economics & Finance, 41, 287-294. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001) “Bounds testing approaches to the analysis of level relationships” Journal of applied econometrics, 16(3), 289-326. Rapach, D. E. (2001) “Macro shocks and real stock prices” Journal of Economics and Business, 53(1), 5-26. Ross, S. A. (1976) “The arbitrage theory of capital asset pricing” Journal of Economic Theory, 13(3), 341–360. Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014) “Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework” In Festschrift in Honor of Peter Schmidt (pp. 281-314). Springer New York. Taylor, J. B. (1993) “Discretion versus policy rules in practice” Carnegie-Rochester Conference Series on Public Policy, 39, 195-214. CBRT. (2016) “Monetary and Exchange Rate Policy for 2017” Available from https://goo.gl/rSSBbi
There are 1 citations in total.

Details

Primary Language Turkish
Journal Section Research Article
Authors

Hüseyin Kaya 0000-0002-2231-9675

Barış Soybilgen 0000-0003-4906-1878

Publication Date April 30, 2019
Acceptance Date September 21, 2018
Published in Issue Year 2019 Volume: 19 Issue: 2

Cite

APA Kaya, H., & Soybilgen, B. (2019). Evaluating the asymmetric effects of production, interest rate and exchange rate on the Turkish stock prices. Ege Academic Review, 19(2), 293-300. https://doi.org/10.21121/eab.556344
AMA Kaya H, Soybilgen B. Evaluating the asymmetric effects of production, interest rate and exchange rate on the Turkish stock prices. ear. April 2019;19(2):293-300. doi:10.21121/eab.556344
Chicago Kaya, Hüseyin, and Barış Soybilgen. “ Interest Rate and Exchange Rate on the Turkish Stock Prices”. Ege Academic Review 19, no. 2 (April 2019): 293-300. https://doi.org/10.21121/eab.556344.
EndNote Kaya H, Soybilgen B (April 1, 2019) Evaluating the asymmetric effects of production, interest rate and exchange rate on the Turkish stock prices. Ege Academic Review 19 2 293–300.
IEEE H. Kaya and B. Soybilgen, “ interest rate and exchange rate on the Turkish stock prices”., ear, vol. 19, no. 2, pp. 293–300, 2019, doi: 10.21121/eab.556344.
ISNAD Kaya, Hüseyin - Soybilgen, Barış. “ Interest Rate and Exchange Rate on the Turkish Stock Prices”. Ege Academic Review 19/2 (April 2019), 293-300. https://doi.org/10.21121/eab.556344.
JAMA Kaya H, Soybilgen B. Evaluating the asymmetric effects of production, interest rate and exchange rate on the Turkish stock prices. ear. 2019;19:293–300.
MLA Kaya, Hüseyin and Barış Soybilgen. “ Interest Rate and Exchange Rate on the Turkish Stock Prices”. Ege Academic Review, vol. 19, no. 2, 2019, pp. 293-00, doi:10.21121/eab.556344.
Vancouver Kaya H, Soybilgen B. Evaluating the asymmetric effects of production, interest rate and exchange rate on the Turkish stock prices. ear. 2019;19(2):293-300.