The purpose of this study for Turkey which is one of the developing countries is to examine the effect of a country’s risk on stock prices. The relationship among the variables such as economic risk, political risk, financial risk and country risk is calculated by ICRG (International Country Risk Guide) that has been used frequently in recent studies and that they were proved to be trustworthy on one hand and BIST 100 index return on the other. It was tested by the Time Series Analysis for the period between 2002: M1-2015: M15 at monthly level. For this purpose, firstly the stability of the variables was examined. Then the long-term relationship between the Johansen cointegration analysis and the variables was examined. It is followed by the error correction model and finally the causality relation between the variables by Granger causality analysis. According to the results, a negative relationship was determined between stock return and economic, financial, politic and country risk premiums. As a result of the causality analysis, a bilateral causality relationship between stock income and economic risk was determined while a unilateral causality relationship was determined between stock income and financial, political risk, and country risk. The results of this study are thought to be important for many people and institutions, especially for investors.
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