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The effects of macroeconomic factors on stock returns: Istanbul Stock Market

Husam Rjoub (Department of Banking and Finance, Near East University, Nicosia, North Cyprus)
Turgut Türsoy (Department of Banking and Finance, Near East University, Nicosia, North Cyprus)
Nil Günsel (Department of Banking and Finance, Near East University, Nicosia, North Cyprus)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 6 March 2009

6143

Abstract

Purpose

The purpose of this paper is to investigate the performance of the arbitrage pricing theory (APT) in the Istanbul Stock Exchange (ISE) on a monthly basis, for the period January 2001 to September 2005.

Design/methodology/approach

This study examines six pre‐specified macroeconomic variables which are: the term structure of interest rate, unanticipated inflation, risk premium, exchange rate and money supply. All these are the same as those used by Chen, Roll and Roll for the US market. In this study, the authors develop one more variable namely unemployment rate, which has a relation with the stock return.

Findings

Using the OLS technique, the authors observed that there are some differences among the market portfolios. Before starting to comment on the result of OLS, the serial correlation problem was discussed by using Durbin‐Watson statistics. In this study, the critical values were ranged from between 1.33 and 1.81 (T=57, K=6). Our test results confirmed that in ten out of the 13 there were no serial correlations. Our results show that there are big differences among market portfolios against macroeconomic variables through the variation of R2. In the remaining portfolios; there was no evidence to suggest.

Research limitations/implications

In this paper, the authors face a problem that was no corporate bond in Turkey's market.

Originality/value

This analysis appears to be the first empirical test of APT using the CAPM formula for finding the risk premium point for ISE.

Keywords

Citation

Rjoub, H., Türsoy, T. and Günsel, N. (2009), "The effects of macroeconomic factors on stock returns: Istanbul Stock Market", Studies in Economics and Finance, Vol. 26 No. 1, pp. 36-45. https://doi.org/10.1108/10867370910946315

Publisher

:

Emerald Group Publishing Limited

Copyright © 2009, Emerald Group Publishing Limited

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