ASYMMETRIC IMPACT OF EXCHANGE RATE TO ISTANBUL STOCK MARKET: A NONLINEAR ARDL APPROACH

Abstract

The stock market plays an important role for financial organizations and portfolio managers in modern economics. Volatility in stock market return is one of the essential tools between lenders and borrowers that help them to assess the risk of portfolios and predicting the return of future investment’s income. This paper investigates the relationship between the stock market and the exchange rates of Turkey. BIST100 index is employed as a proxy for stock returns and TL/US$ and TL/EURO (currency rate of Turkish Lira against US Dollar and EURO) are considered for exchange rate exposure. The series is on monthly data over the period 2008m10- 2021m03. We use the NARDL and ARDL mythology of the time series model to determine the short-run and long-run impacts of the exchange rates on the İstanbul Stock Market. Our findings indicate that there is a relationship between both exchange rates (US Dollar and EURO) and stock returns. This relationship is positive, asymmetric, and statistically significant for both the long and short run.