Financial crisis and changes in determinants of risk and return: an empirical investigation of an emerging market (ISE)
Date
1999
Authors
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Instructor
Source Title
Multinational Finance Journal
Print ISSN
1096-1879
Electronic ISSN
Publisher
Multinational Finance Society
Volume
3
Issue
4
Pages
223 - 252
Language
English
Type
Article
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Abstract
This paper examines how determinants of volatility and stock returns change with financial crisis. The contributions of the paper are twofold. First, using a GARCH-M framework, risk and return are jointly modeled by using macroeconomic variables both in the variance and the mean equations. The conditional variance equation is specified by including macro-economic variables, a relevant information set for emerging economies, that is often overlooked in various GARCH specifications. Second, determinants of risk and return are investigated before during and after a major financial crisis at ISE. We show that, both the determinants of risk and the risk-return relationship change as the economy switches from one regime to the other.
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Keywords
Emerging markets, Financial crisis, GARCH-M, Istanbul Stock Exchange, Macroeconomic variables, Risk, Stock returns