Stock return and monetary variables in Istanbul Securities Exchange: a cointegration analysis
Argaç, A. Reha
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This study investigates the long run relationship between stock prices and monetary variables and examines the different aspects of the relation for the period between 1988 and 1995, and for three subperiods within this range using daily data. The discrimination between the periods are made due to the strict changes in the volume of trade in ISE which indicate us a structural change.A recently developed statistical theory, i.e. the cointegration theory, which is based on the use of time series regressions and permits us to study the long-run relations of the nonstationary time series, is used for examining the relation.The results show that especially in last five years, there is a tendency to weaken the relation between monetary variables and the stock prices in Turkish stock market. This tendency can be explained by the rapid increase in the volume of trade causing an increase in the number of investors utilizing the same set of information.