STOCK MARKET INTEGRATION BETWEEN TURKEY AND BRICS COUNTRIES: EMPIRICAL EVIDENCE FROM COINTEGRATION TEST WITH STRUCTURAL BREAKS

Year 2020, Volume: 9 Issue: 2, 189 - 195, 30.06.2020

Yuksel Iltas

https://doi.org/10.17261/Pressacademia.2020.1228

Abstract

Purpose - The goal of this paper is to examine the cointegration relationship between BIST-100 index and BRICS countries’ (Brazil, Russia, India, China, and South Africa) stock market indices using monthly data over the period 2003:01-2019:08. To that end, this paper performs a cointegration test that considers both sharp and gradual breaks.
Methodology - Long term relationship between BIST-100 index and BRICS countries stock indexes for January 2003-August 2019 period is examined by Dickey and Fuller (1981) and Phillips and Perron (1988) unit root test and Tsong et al. (2016) cointegration test with structural breaks.
Findings- The empirical findings indicate that BIST-100 index is cointegrated with the stock market indices in Brazil, Russia, and China, while it is not cointegrated with the stock market indices in India and South Africa.
Conclusion- The findings reveal that BIST 100 is not cointegrated with the stock market indices in India and South Africa. These findings imply that investors in BIST can also invest in India’s and South Africa’s stock markets. In this way, investors will be able to reduce their risks by investing in stock exchange indices which has not long-term relationship (cointegration).

Keywords

Stock markets, BIST 100 index, BRICS countries, cointegration test, structural breaks

References

• Akel, V. (2015). Kırılgan Beşli Ülkelerinin Hisse Senedi Piyasaları Arasındaki Eşbütünleşme Analizi. Uluslararası Yönetim İktisat ve İşletme Dergisi, 11(24), 75–96.
• Aktan, B., Mandacı, P. E., Kopurlu, B. S., and Ersener, B. (2009). Behaviour of Emerging Stock Markets In The Global Financial Meltdown: Evidence From BRIC-A. African Journal of Business Management, 3(9), 396–404.
• Arouri, M. E. H., Nguyen, D. K., and Pukthuanthong, K. (2012). An International CAPM For Partially Integrated Markets: Theory and Empirical Evidence. Journal of Banking and Finance, 36(9), 2473–2493.
• Bayri, O., and Güloğlu, B. (2005). Hisse Senedi ve Yabancı Para Piyasalarının Entegrasyonu: Türkiye, AB, ABD Örneği. İktisat, İşletme ve Finans, 20(234), 13–34.
• Bekaert, G., and Harvey, C. R. (1995). Time‐Varying World Market Integration. The Journal of Finance, 50(2), 403–444.
• Bekaert, G., Harvey, C. R., Lundblad, C. T., and Siegel, S. (2011). What Segments Equity Markets? Review of Financial Studies, 24(12), 3841–3890.
• Bozoklu, Ş., and Saydam, İ. M. (2010). BRIC Ülkeleri ve Türkiye Arasındaki Sermaye Piyasaları Entegrasyonunun Parametrik ve Parametrik Olmayan Eşbütünleşme Testleri ile Analizi. Maliye Dergisi, 159, 416–431.
• Boztosun, D., and Çelik, T. (2011). Türkiye Borsasının Avrupa Borsaları ile Eşbütünleşme Analizi. Süleyman Demirel Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 16(1), 147–162.
• Carrieri, F., Errunza, V., Hogan, K., Carrieri, F., Errunza, V., and Hogan, K. (2007). Characterizing World Market Integration through Time. The Journal of Financial and Quantitative Analysis, 42(4), 915–940.
• Chang, T., and Lu, Y. C. (2006). Equity Diversification in Two Chinese Share Markets: Old Wine and New Bottle. Economics Bulletin, 7(4), 1–7.
• Chang, T., and Tzeng, H. W. (2009). International Equity Diversification Between The United States and Its Major Trading Partners: Nonparametric Cointegration Test. International Research Journal of Finance and Economics, 32, 139–147.
• Chittedi, K. R. (2010). Global Stock Markets Development and Integration: With Special Reference to BRIC Countries. International Review of Applied Financial Issues and Economics, (1), 018–036.
• Çıtak, L., and Gözbaşı, O. (2007). İMKB ile Önde Gelen Gelişmiş ve Gelişmekte Olan Ülke Borsaları Arasındaki Bütünleşmenin Temel Endeks ve Ana Sektör Endeksleri Temelinde Analizi. Dokuz Eylül Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 22(2), 249–271.
• Diamandis, P. F. (2009). International Stock Market Linkages: Evidence From Latin America. Global Finance Journal, 20(1), 13–30. https://doi.org/10.1016/j.gfj.2009.03.005
• Dickey, D. A., and Fuller, W. A. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49(4), 1057.
• Gözbaşı, O. (2010). İMKB ile Gelişmekte Olan Ülkelerin Hisse Senedi Piyasalarının Etkileşimi: Eşbütünleşme ve Nedensellik Yaklaşımı. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 35, 99–118.
• Kanas, A. (1998). Linkages Between The US and European Equity Markets: Further Evidence From Cointegration Tests. Applied Financial Economics, 8(6), 607–614.
• Kearney, C., and Lucey, B. M. (2004). International equity market integration: Theory, evidence and implications. International Review of Financial Analysis, 13(5 SPEC.ISS.).
• Korkmaz, T., Zaman, S., and Çevik, E. İ. (2007). İMKB ile Uluslararası Hisse Senedi Piyasaları Arasındaki Entegrasyon İlişkisinin Yapısal Kırılma Testleri İle Analizi. Akdeniz İ.İ.B.F. Dergisi, 17, 40–71.
• Lehkonen, H. (2015). Stock Market Integration and the Global Financial Crisis. Review of Finance, 19(5), 2039–2094.
• Lim, L. K. (2007). Linkages between ASEAN stock markets: A cointegration approach. MMODSIM 2007 International Congress on Modelling and Simulation, 1818–1824.
• Mandacı, P. E., and Taşkın, D. (2005). AB’ye Uyum Sürecinde İMKB’nin AB Piyasaları ile Karşılaştırılması. Muhasebe ve Finansman Dergisi, 26, 127–137.
• Marashdeh, H. (2005). Stock Market Integration in the MENA Region: An Application of the ARDL Bounds Testing Approach. Faculty of Commerce-Economics Working Papers, 05–27(November), 1–14.
• Özşahin, Ş. (2017). Yükselen Piyasa Ekonomilerinde Menkul Kıymetler Borsalarının Entegrasyonu: Türkiye ve BRICS Ülkeleri Üzerine Çoklu Yapısal Kırılmalı Eş-bütünleşme Analizi. Yönetim ve Ekonomi: Celal Bayar Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 24(2), 601–619.
• Phillips, P. C. B., and Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346.
• Pukthuanthong, K., and Roll, R. (2009). Global market integration: An alternative measure and its application. Journal of Financial Economics, 94(2), 214–232.
• Sevüktekin, M., and Nargeleçekenler, M. (2008). Türkiye ve Amerika’daki Hisse Senedi Piyasaları Arasındaki Dinamik İlişkinin Belirlenmesi. Finans Politik & Ekonomik Yorumlar, 45(520), 15–22.
• Shamsuddin, A. F. M., and Kim, J. H. (2003). Integration and interdependence of stock and foreign exchange markets: An Australian perspective. Journal of International Financial Markets, Institutions and Money, 13(3), 237–254.
• Tabak, B. M., & Lima, E. J. A. (2002). Causality and Cointegration in Stock Markets: the Case of Latin America. Banco Central Do Brasil Working Paper Series, 56, 3–24.
• Tsong, C. C., Lee, C. F., Tsai, L. J., and Hu, T. C. (2016). The Fourier Approximation and Testing For The Null of Cointegration. Empirical Economics, 51(3), 1085–1113.
• Vuran, B. (2010). IMKB 100 Endeksinin Uluslararası Hisse Senedi Endeksleri ile İlişkisinin Eşbütünleşim Analizi ile Belirlenmesi. İstanbul Üniversitesi İşletme Fakültesi Dergisi, 39(1), 154–168