Does Equity Market Integration Exist Between Turkey and the Eurozone?

Berto Usman,Fitra Wahyudi,Nega Muhabaw Kassie

doi:10.15294/jejak.v11i1.12488

Abstract

This research investigates the existence of stock market integration between Turkey and the Eurozone. In this study, the performance of Turkey’s stock exchange is proxied by the BIST100, and the EURO STOXX50 is employed as a proxy for the Eurozone index. We hypothesize that there is a dynamic relationship between Turkey and the Eurozone. Methodologically, our research was conducted by employing monthly time series data obtained from EIKON datastream International. In order to demonstrate the extent of equity market integration between Turkey and Eurozone, a vector autoregression model (VAR) was utilized. According to the results, there is no co-integration between these two equity markets. This is in line with the output of residual matrix test, where the correlation between these two market indices was found to be low. However, a Granger causality test indicated that there was a low one-way contribution from Turkey to the Eurozone index during the observation period.

Highlights

The growth rate of the Turkish economy is among the highest worldwide, and its financial market has grown significantly (Aysan & Ermişoğlu, 2013)
The basis of this study is the assumption that the Borsa Istanbul (LN_BIST100) and the Eurozone (LN_EURO STOXX50) indiceshave specific characteristics
The short-run dynamics that have been previously captured are useful in describing the phenomena occurring between the LN_BIST100 and the LN_EURO STOXX50

Summary

Introduction

The growth rate of the Turkish economy is among the highest worldwide, and its financial market has grown significantly (Aysan & Ermişoğlu, 2013). Haidar (2012) notes that most European countries face difficulties in rolling over their government debt without helpfrom third parties as creditors. The worst of this financial distress is reflected in the inability of Greece and Italy to manage their obligations, which since the year 2000 have reached a level of debt of greater than 100% of their total GDPs (Aysan & Ermişoğlu, 2013)

Objectives

Methods

Conclusion