INVESTIGATION OF THE RELATIONSHIP BETWEEN MACROECONOMIC INDICATORS AND STOCK MARKET INDICES AND THE IMPACT OF COVID-19

Abstract

In this study, the effects of CPI, 5-year bond yields, real effective exchange rate, credit volume, industrial production index, interest rate, CDS (Credit Default Swaps) premium and GDP (Gross Domestic Product) on BIST Financial and BIST Industrial indices were examined. Also, while investigating the relationship between selected macroeconomic variables and stock market indices, the effect of COVID-19 on this relationship was also tested. In the study in which two different models were established, ARDL Boundary Test and Toda-Yamamoto Granger Causality Test were preferred as methods. The time dimension of the study covers the periods 2008:Q1-2022:Q2. According to the bounds test results of the study, there is a strong cointegration relationship between the variables. Especially CDS premiums have a negative effect on both models. In addition, the dummy variable added to the 2020:Q1 period shows that the COVID-19 pandemic affected the stock markets. Finally, according to the Toda Yamamoto Granger causality results, there is a strong Granger causality relationship between the variables. According to the first model, all variables are the Granger cause of BIST Financial. According to the second model, except for the CPI, all other variables are the Granger cause of BIST Industrial. In summary, it has been determined that the selected stock market indices are significantly affected by the main macroeconomic variables.