The impact of interest rate and exchange rate volatility on banks' stock returns and volatility: Evidence from Turkey

Kasman, Saadet; Vardar, Gülin; Tunç, Gökçe

doi:10.1016/j.econmod.2011.01.015

Cited by 122 publications

(106 citation statements)

References 30 publications

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“…Consistent with Elyasiani et al (1995) and Kasman et al (2011) this finding implies that results regarding volatility effects on returns of both indices. The impact of exchange rate volatility on the stock returns is measured by the coefficient δ 1 .…”

Section: Estimated Conditional Returns With Garch (1 1) Modelsupporting

confidence: 77%

“…The impact of interest rate volatility on stock return's volatility is measured by the coefficient δ 2 . Consistent with Kasman et al (2011) the parameter of interest rate volatility δ 2 is positive and statistically significant only for KSE-100. This implication shows that, in response to increased interest rate volatility, the stock return's volatility of KSE-100 becomes more volatile in the subsequent periods.…”

Section: Estimated Conditional Returns With Garch (1 1) Modelsupporting

confidence: 57%

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Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy

Rana

Akhter

2015

Financial Innovation

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Background: This study aims to investigate the extent to which the conditional volatilities of both Shari'ah compliant stock and conventional stock are related to those of interest rate and exchange rate in the emerging economy of Pakistan. Methods: We used KMI 30 and KSE 100 indices for Islamic and conventional stock for the period of July 2008 to November 2013. We employed Generalized Autoregressive Conditional Heteroskedastic in the mean (GARCH-M) model. This framework relaxes constancy assumption of classical linear regression (CLRM) model and allows exchange rate and interest rate volatility to evolve over time. The GARCH-M framework also reveals results about risk-return trade-off in the context of both Islamic and conventional stock indices. Results: The findings show positive and statistically significant effect of interest rate volatility on KSE-100, whereas KMI-30 remains unaffected by the same. Exchange rate volatility is found to be significant for both conventional and Islamic indices. The relationship of risk coefficient (γ) and stocks returns, as expected, is positive and statistically significant for both KMI-30 and KSE-100. This result is consistent with the theory of risk-return trade-off. The results of parametric t-test show significant difference between returns of both indices. This implies that Shari'ah compliant stock index (KMI-30) of Pakistan underperforms its conventional counterpart. Conclusion: By using different performance measures (Sharp ratio, Jensen alpha, Treynor ratio), this study also investigates the hypothesis that Islamic stock index has inferior performance compared with unscreened conventional counterparts due to availability of a smaller investment universe, increased monitoring costs, and limited diversification.

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Section: Estimated Conditional Returns With Garch (1 1) Modelsupporting

confidence: 77%

Section: Estimated Conditional Returns With Garch (1 1) Modelsupporting

confidence: 57%

Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy

Rana

Akhter

2015

Financial Innovation

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“…In general terms, it is therefore reasonable to assume that the investment decisions of market participants are influenced by a large set of explanatory variables that determine the demand for shares in the market (Kasmana et al, 2011). The process of formation of the application of actions of a generic listed company (and therefore also of a bank) was analyzed in the literature with a focus on both micro-and macro-economies, using different methodologies and variables.…”

Section: Literature Reviewmentioning

confidence: 99%

What Influences Bank Stock Prices in Times of Crisis? An International Survey

Pacelli¹

2017

IJEF

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The paper assesses whether the European banks' stock prices are predicted or affected by changes in balance-sheet indicators and macroeconomic variables. The sample covers the time period from January 2007 to December 2013. Estimates use the multiple regression model based on the weighted least squares (WLS) estimator. Results show that the stock prices of European banks are positively related to asset quality, liquidity and banks' capital ratios. However, in the same period, inflation rate and public debt exert a negative and significant effect on bank stock prices. Our findings are more significant in times of high market turbulence as have been experienced for almost a decade. These have provoked the investors' perceptions to be more unstable and volatile. The availability of information remains limited and poor. Therefore, it is necessary to emphasize that identifying the causal determinants of stock prices in the markets could generate important practical and policy implications because of the role played by banks in financing the economic system, and will also attract investors (Note 1).

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“…[19] investigates the effects of interest and exchange rate changes on Turkish bank's stock returns and finds significant negative impact. Their results further indicate that interest and exchange-rate volatility are the major determinants of conditional bank stock return volatility.…”

Section: Introductionmentioning

confidence: 99%

Investigating Daily Naira/Dollar Exchange Rate Volatility: A Modeling using GARCH and Asymmetric Models

Musa¹,

Abubakar²

2014

IOSRJM

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The impact of interest rate and exchange rate volatility on banks' stock returns and volatility: Evidence from Turkey

Cited by 122 publications

References 30 publications

Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy

Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy

What Influences Bank Stock Prices in Times of Crisis? An International Survey

Investigating Daily Naira/Dollar Exchange Rate Volatility: A Modeling using GARCH and Asymmetric Models

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