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Time-scale Effects of International Risk Factors on Emerging Equity Markets: The Case of Turkey

Alper Ozun, Atilla Cifter


This paper empirically examines the effects of the US monetary policies on the emerging stock markets by using wavelet analysis. Volatilities in interest rates and exchange rates in advanced industrial countries might have impact on the emerging markets in accordance with the international purchasing power parity theorem. Daily log-return values of the interest rates on 10 years US T-Bills and the EUR/USD parity as the independent variables, and of the Istanbul Stock Exchange from 02/01/2003 to 22/02/2006 are employed for the empirical tests. By using wavelets analysis and granger causality tests, it is empirically showed that changes in the US interest rates and EUR/USD parity affect the return on the Istanbul Stock Exchange National 100 Index on different timescales. The effects of the interest rates are earlier reflected on the stock prices than those of the parity are. The levels of the international risk factors on the return of the ISE vary on the timescale, as well.


Emerging markets, Wavelets, Stock returns, Granger causality, impulse response analysis

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