EFFECTS OF DOW JONES AND USD ON BIST100 INDEX AND OBSERVATION OF THE RELATIONSHIP AMONG THEM

Abstract

Dow Jones and USD play an essential role in developing stock markets. Even macroeconomic announcements of FED have strong effects on stock markets of developing countries. Thus, stock index and macroeconomic announcements in terms of currency, inflation, and unemployment rate help individual and institutional investors with forecasting short and long term trend for their native stock markets. Snap and on-going volatility on USDTRY can lead in short and long run volatility on BIST100. Furthermore, Dow Jones which is accepted as an indicator in the World also can result in volatility at BIST100. Mortgage crisis is the best proof for relation between Dow Jones and BIST100 since both of them decreased owing to mortgage crisis. It is clear that crisis was felt all over the world. However, crisis starting in U.S was felt firstly U.S Stock Markets Indexes then jumped to nearly all over the world. That is, while developing stock markets are sensitive against to U.S Market Indexes, developed markets are not too much sensitive. Furthermore, USD is an important parameter for countries even they have strong economy and financial markets. For this reason, effects of Dow Jones and USD on BIST100 and relation among these variables will be obsereved through unit root test, heteroscedasticity test, Johensan Coentegration test, error correction and Granger Causality test.