AN EMPRICAL STUDY REGARDING THE SHORT AND LONG TERM INTERACTION AMONG THE STOCK EXCHANGE MARKETS OF BRICS, MIST, FRAGILE FIVE

Abstract

The purpose of this study is to explore the interaction direction whether the Turkish stock market and the stock markets of other countries within the scope of BRICS, MIST and Fragile Five, which are the result of the international determinism of the economic situation and trends of the countries in the global system, are affecting each other or not. In order to test the interaction between the Turkish Stock Exchange and the stock exchanges within the scope of BRICS, MIST and Fragile Five countries, weekly closing data were handled for the period between June 7, 2009 and December 25, 2016 for the following indexes: BIST100 (Turkey), BVSP (Brazil), MCX (Russia), BSESN (India), SSEC (China), INVSAF40 (South Africa), MMX (Mexico), JKSE (Indonesia) and KOSPI (South Korea). After the basic statistical properties of the series are determined in the study, in order to test the financial relation; the interaction between the series is explained by co integration and causality tests. Static analysis are determined by ADF (Augmented Dickey-Fuller) and PP (Phillips Perron) unit root tests and later Zivot-Andrews root test was performed which is one of the next generation unit root tests, allows single structural break from the next generation. The existence of a long-term relationship between stock exchanges is explained by the Johansen integration test. In addition, the long-run relationship between the Gregory-Hansen integration test and variables was assessed in the structural break form. Finally, Toda-Yamamoto Granger causality analysis was conducted to determine the direction of the interaction. Long-term relationships were found among the results of the analysis that were performed. While two-way causality was found among BIST100 (Turkey) with BVSP (Brazil) and BSESN (India); one-way causality was determined towards BIST100 (Turkey) from INVSAF40 (South Africa), JKSE (Indonesia) and KOSPI (South Korea).