EFFECT OF GOLD PRICE VOLATILITY ON STOCK RETURNS: EXAMPLE OF TURKEY

Abstract

This study analyzes the effect of fluctuations in gold prices on ISE 100 index using daily prices and the index data from 01.01.2009 to 31.12.2012. The raw data has been converted into earnings yields and analyzed. The study first determines whether or not the use of a GARCH model would be appropriate using a heteroskedasticity test. The test results show that there was an ARCH effect in both variables, and that GARCH modeling could be used. The results obtained from MGARCH modeling show that gold and stock exchange yields have been affected both by their own shocks and by shocks of each other.

Keywords

• Gold Prices, Stock Returns, GARCH modeling

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