Financial markets became indivisible part of global economy in 20th century. Their importance is still a growing process. The great depression was triggered by stock market crash in US and similarly current crises took its origin from financial markets. So, stock markets and the risk in these markets are economic phenomena which need to be studied a lot. This paper focuses on the characteristics of the risk at the Istanbul Stock Exchange(IMKB) and uses GARCH/ARCH framework for economic analysis. There are a lot of papers on this kind of markets, but they mainly investigate the risk in mature economies. The similar researches should be done for emerging markets as in nowadays their importance and influence is increasing. Hopefully this paper will be pharos for similar investigations
Table of Contents
1. Motivation
2. Data
3. Estimation
4. 1st subsample: 1991-1997
5. 2nd subsample: 1998-2004
6. 3rd subsample 2004-2007
7. 4th subsample 2007-2009
8. Conclusion
Research Objectives and Topics
The primary objective of this paper is to analyze the characteristics of financial risk at the Istanbul Stock Exchange (IMKB) using GARCH/ARCH frameworks. The study aims to identify the relationship between the Turkish stock market and global markets, while investigating how different sample periods and economic conditions affect model efficacy.
- Application of GARCH/ARCH models to emerging market data.
- Evaluation of market volatility clustering and residual distributions.
- Impact of economic crises and political instability on model performance.
- Comparative analysis of different subsample periods (1991-2009).
- Forecasting performance and variance analysis within the Istanbul Stock Exchange.
Excerpt from the Book
Estimation
So, first we run basic regression, id est try to identify the relationship between Turkey’s stock exchange market and main stock exchange markets of the world. Regression of rimkb on its lag and other indices’ lags reveals out that there is not significant relationship among them. Actually it is very unusual and surprising result. But we should consider that we are analyzing almost last two decades data, which were very problematic for Turkey. During the observed period there were one military revolution and two economic crises which were specific to Turkey. In 1994 and 2000-2001 crises Turkey’s economy demonstrated very different behavior in comparison with the world economy. So, insignificant relationship might stem from above mentioned reasons. Perhaps in smaller samples we would see significant relationship.
Summary of Chapters
1. Motivation: Introduces the importance of financial markets and the necessity of studying risk in emerging markets like the Istanbul Stock Exchange.
2. Data: Describes the variables used, including major global indices and the creation of corrected indices to account for missing values.
3. Estimation: Presents the initial regression analysis, identifies volatility in residuals, and applies GARCH (1, 1) and ARCH models to capture market behavior.
4. 1st subsample: 1991-1997: Analyzes the period covering early economic volatility in Turkey, finding high volatility and abnormal residual distribution.
5. 2nd subsample: 1998-2004: Discusses the unstable period marked by natural disasters and economic crises, noting the market's reliance on the German stock index.
6. 3rd subsample 2004-2007: Characterizes this period as the most stable due to political factors and economic growth, though meaningful regression results were limited.
7. 4th subsample 2007-2009: Examines the impact of the global economic crisis on the IMKB and the role of government economic policies.
8. Conclusion: Synthesizes the findings, confirming that model effectiveness varies significantly across different sample sizes and economic contexts.
Keywords
Istanbul Stock Exchange, IMKB, GARCH, ARCH, Financial Risk, Market Volatility, Emerging Markets, Economic Crisis, Time Series, Regression Analysis, Residuals, Forecasting, Heteroskedasticity, Stock Market Returns, Turkey.
Frequently Asked Questions
What is the primary focus of this research?
The paper examines the risk characteristics of the Istanbul Stock Exchange (IMKB) and applies GARCH and ARCH models to understand market volatility.
Which methodology is employed in this study?
The author uses econometric methods, specifically GARCH (Generalized Autoregressive Conditional Heteroskedasticity) and ARCH models, alongside basic linear regression and residual analysis.
How does the study handle missing data?
Missing values caused by varying holiday schedules across global markets were addressed by creating corrected indices for the IMKB and major world markets.
What were the main findings regarding the IMKB's relationship with global markets?
The study found a surprisingly insignificant relationship between the Turkish market and major global indices, likely due to specific national economic crises and political instability over the two-decade sample period.
Why are different subsamples used in the analysis?
The author argues that Turkey's economic history is highly heterogeneous, requiring separate analysis of different time periods to account for unique economic events and varying levels of stability.
How is the GARCH (1, 1) model evaluated?
The model is evaluated based on the significance of its coefficients, the persistence of shocks, and its ability to reduce volatility clustering and autocorrelation in the residuals.
What impact did the 2000-2001 crises have on the estimation results?
These crises created significant deviations from global economic patterns, resulting in higher volatility and making it difficult to maintain consistent and meaningful regression results across the entire sample.
Did the study successfully identify an asymmetric behavior in the IMKB?
The study tested for threshold and asymmetric effects using exponential GARCH models, but concluded that these models did not significantly improve the explanation of the market's asymmetric behavior.
- Citation du texte
- Samir Huseynov (Auteur), 2010, Exploring the characteristics of risk at the Istanbul Stock Exchange, Munich, GRIN Verlag, https://www.grin.com/document/188823
