Abstract
This study investigates the impact of macroeconomic variable shocks on industrial and financial stock returns in the Borsa Istanbul. To this end, we use the generalized forecast error variance decompositions and generalized impulse responses. The results show that inflation, the growth rate of the money supply, and the exchange rate provide significant information for forecasting industrial and financial stock market volatility. The impact of industrial production on stock returns appears to be negligible, both in the short and long horizons. The study extends our understanding of sectoral stock market behavior in a developing country.
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