Stock market integration between Turkey and BRICS countries: empirical evidence from a cointegration test with structural breaks

Abstract

Purpose - The goal of this paper is to examine the cointegration relationship between BIST-100 index and BRICS countries’ (Brazil, Russia, India, China, and South Africa) stock market indices using monthly data over the period 2003:01-2019:08. To that end, this paper performs a cointegration test that considers both sharp and gradual breaks. Methodology - Long term relationship between BIST-100 index and BRICS countries stock indexes for January 2003-August 2019 period is examined by Dickey and Fuller (1981) and Phillips and Perron (1988) unit root test and Tsong et al. (2016) cointegration test with structural breaks. Findings- The empirical findings indicate that BIST-100 index is cointegrated with the stock market indices in Brazil, Russia, and China, while it is not cointegrated with the stock market indices in India and South Africa. Conclusion- The findings reveal that BIST 100 is not cointegrated with the stock market indices in India and South Africa. These findings imply that investors in BIST can also invest in India’s and South Africa’s stock markets. In this way, investors will be able to reduce their risks by investing in stock exchange indices which has not long-term relationship (cointegration).