Testing long-run relationship between stock market and macroeconomic variables in the presence of structural breaks: The Turkish case

ÇAĞLI E. Ç., Halaç U., Taşkin D.

International Research Journal of Finance and Economics, vol.48, pp.50-61, 2010 (Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 48
  • Publication Date: 2010
  • Journal Name: International Research Journal of Finance and Economics
  • Journal Indexes: Scopus, IBZ Online, EconLit, Index Islamicus
  • Page Numbers: pp.50-61
  • Keywords: Cointegration, Macroeconomic variables, Stock market, Structural breaks, Turkish economy
  • Dokuz Eylül University Affiliated: Yes

Abstract

In this paper, the relationship between macroeconomic variables and stock market level is investigated. In the empirical analysis, well-known (Zivot Andrews, 1992; Lumsdaine Papell, 1997) unit root tests are conducted to determine the order of integration of the time series. Gregory-Hansen test which allows for structural breaks in the data is employed to examine the cointegration between macroeconomic fundamentals and stock market prices. As a result, Istanbul Stock Exchange National-100 (ISE-100) index is found as cointegrated with the variables, namely gross domestic product, U.S. crude oil price, and industrial production. © EuroJournals Publishing, Inc. 2010.