Araştırma Makalesi


DOI :10.26650/ISTJECON2020-0013   IUP :10.26650/ISTJECON2020-0013    Tam Metin (PDF)

The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies

İsmail Erkan Çelik

This study examines the impact of exchange rate and interest changes on stock returns and volatility of Turkish insurance companies using the EGARCH model for the period of 01/01/2009 to 15/04/2020. The results show: (i) while interest rate has a negative and significant effect on the conditional stock return, its effect on the volatility of stock returns of insurance companies is limited; (ii) however, the exact opposite is true for the exchange rate risk. The exchange rate risk exerts an important impact on the volatility of insurance stock returns but it has no effect on the mean stock returns of insurance companies; (iii) the findings also indicate that the volatility of insurance stock returns are highly persistent over time and they are more sensitive to old news than recent surprises; (iv) positive and negative news have an asymmetric effect on volatility implying that positive innovations (good news such as a market) have a larger impact on current conditional variance (current volatility of returns) than negative innovations (bad news such as market stagnation) of the same magnitude; (v) finally, the volatility of insurance portfolio’s and insurance companies’ stock returns has risen significantly during the financial crisis of 2008 compared to the rest of the sample period.

JEL Classification : D51 , F3 , G32

PDF Görünüm

Referanslar

  • Mouna, A. & Anis, J. (2016) Market, interest rate, and exchange rate risk effects on financial stock returns during the financial crisis: AGARCH-M approach, Cogent Economics & Finance, 4:1, 1125332, DOI: 10.1080/23322039.2015.1125332. google scholar
  • Bach, B. & Ando, A. (1957). The redistribution of effects of inflation. The Review of Economics and Statistics, 3, 1–13. google scholar
  • Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31, 307-327 google scholar
  • Brewer, E., Carson, J., Elyasiani, E., Mansur, I., & Scott, W. (2007). Interest rate risk and equity values of life insurance companies: A GARCH‐M model. Journal of Risk and Insurance, 74, 401 –423. google scholar
  • Carson, J. M., Elyasiani, E. & Mansur, I. (2008) Market Risk, Interest Rate Risk, and Interdependencies in Insurer Stock Returns: A System-GARCH Model, Journal of Risk & Insurance, 75(4), 873-891. google scholar
  • Çelik, İ. E. (2019), Assessing the impact of bank risk factors on Turkish bank’s stock returns using The EGARCH-M model, Üçüncü Sektör Sosyal Ekonomi Dergisi, 54(2), 811-827. google scholar
  • Chang, C. L., H. K. Hsu & M. McAleer (2014) The impact of China on stock returns and volatility in the Taiwan tourism industry, North American Journal of Economics and Finance, 29, 381–401. google scholar
  • Çiçek, M. (2014). Türkiye’de faiz, döviz ve borsa: fiyat ve oynaklık yayılma etkileri, Ankara Üniversitesi SBF Dergisi, 65(2), 1-28. google scholar
  • De Sousa, A. M., Noriller, R. M., Huppes C. M., Vaz Lopes, A. C., Meurer, R. M. (2018). Relation between the macroeconomic variables and the stock return in companies of the finance and insurance sector from Latin American stock market, Revista Journal, Vol.12, N3, 20-30. google scholar
  • Dickey, D. & Fuller W. (1981). likelihood ratio statistics for autoregressive time series with a unit root, Econometrica, 49, 1057-1072. google scholar
  • Dikko, H. G., Asiribo, O. E. & Samson, A. (2015). Modelling Abrupt Shift in Time Series Using Indicator Variable: Evidence of Nigerian Insurance Stock, International Journal of Finance and Accounting, 2015, 4(2), 119-130. google scholar
  • Ekinci, A. (2016). The effect of credit and market risk on bank perforamance: evidence from Turkey, International Journal of Economics and Financial Issues, 6(2), 427-434. google scholar
  • Elyasiani, E., & Mansur, I. (2005). The association between market and exchange rate risks and accounting variables: A GARCH model of the Japanese banking institutions, Review of Quantitative Finance and Accounting, 25(2), 183–206. google scholar
  • Elyasiani, E. & Mansur, I., (1998). Sensitivity of bank stock returns distribution to changes in the level of volatility of interest rate: a GARCH-M model, Journal of Banking and Finance, 22, 535–563. google scholar
  • Enders, Walter (2015). Applied econometrics time series, John Wiley & Sons Inc. google scholar
  • Engle R. F. & Granger, C. W. J. (1987). Cointegration and error correction: representation, estimation and testing, Econometrica, 50, 987-1007. google scholar
  • Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation, Econometrica, 50(4), 987-1007. google scholar
  • Engle, R. F. and Ng, V. & Rothschild, M., (1990). Asset pricing with a factor ARCH covariance structure: Empirical estimates for treasury bills, Journal of Econometrics, 45, 213-238. google scholar
  • Flannery, M. J., Hameed, A.S. & Harjes, R. H. (1997). Asset pricing, time-varying risk premia and interest rate risk. Journal of Banking & Finance, 21, 315–335. google scholar
  • Francq, C. & Zakoian, J. M. (2019). GARCH models structure, statistical inference and financial applications, New Jersey: John Wiley & Sons. google scholar
  • French, K., Ruback, R., & Schwart, G. (1983). Effects of nominal contracting on stock returns, Journal of Political Economy, 91(1), 70–96. google scholar
  • Hamadu, D. & A. Ibiwoye (2010). Modelling and forecasting the volatility of the daily returns of nigerian insurance stocks, International Business Research, 3(2), 106-116. google scholar
  • Hooy, C. W., Tan, H. B. & Md Nassir, A. (2004). Risk sensitivity of bank stocks in Malaysia: empirical evidence across the Asian financial crisis, Asian Economic Journal, 18, 261–276. google scholar
  • Jensen, T.K., Johnson, R. R. & McNamara, M. J. (2019) Funding conditions and insurance stock returns: Do insurance stocks really benefit from rising interest rate regimes?, Risk Management and Insurance Review, 22, 367–391. google scholar
  • Kasman, S., Vardar, G. & Tunç, G., (2011). The impact of interest rate and exchange rate volatility on bank’s stock returns and volatility: Evidence from Turkey, Economic Modelling, 28, 1328-1334. google scholar
  • Katusiime, L. (2019). Investigating Spillover Effects between Foreign Exchange Rate Volatility and Commodity Price Volatility in Uganda, Economies 2019, 7, 1, https://www.mdpi.com/journal/economies. google scholar
  • Kessel, R. (1956). Inflation-caused wealth redistribution: a test of a hypothesis, The American Economic Review, 3, 128–141. google scholar
  • Mansur, I. & Elyasiani, E. (1995). Sensitivity of bank equity returns to the level and volatility of interest rates, Managerial Finance, 21, 58-77. google scholar
  • Mechri, N., Ben Hamad, S., Peretti, C., Charf, S. (2018). The Impact of the Exchange Rate Volatilities on Stock Markets Dynamics: Evidence from Tunisia and Turkey, https://ssrn.com/ abstract=3304040 or http://dx.doi.org/10.2139/ssrn.3304040. google scholar
  • Merton, R. C. (1973). An intertemporal capital asset pricing model, Econometrica, 41, 867–887. google scholar
  • Nelson, D. B. (1991). Conditional heteroskedasticity in asset returns: A new approach, Econometrica, 59 (2), 347–370. google scholar
  • Olugbode, M., El-Masry, A. & Pointon, J. (2014). Exchange rate and interest rate exposure of UK industries using first-order autoregressive exponential GARCH-in-Mean (EGARCH-M) approach, The Manchester School, 82(4), 409-464. google scholar
  • Özçiçek, Ö. (1997). Türkiye’de döviz kuru getirisi ve hisse senedi endeks getirileri oynaklıkları arası simetrik ve asimetrik ilişki, İMKB Dergisi, 10(37), 1-11. google scholar
  • Papadamou, S. & Siriopoulos, C. (2014). Interest rate risk and the creation of the Monetary Policy Committee: Evidence from banks’ and life insurance companies’ stocks in the UK Journal of Economics and Business, 71 (2014) 45–67. google scholar
  • Phillips, P. C. B. & Perron, P. (1988). Testing for a unit root in time series regression, Biometrika, 75, 335-346. google scholar
  • Ryan, S. & Worthington, A. (2004). Market, interest rate and foreign exchange rate risk in Australian banking: a GARCH-M approach, International Journal of Applied Business and Economic Research, 2(2), 81–103. google scholar
  • Saunders, A. & Yourougou, P. (1990). Are banks special? The separation of banking from commerce and interest rate risk, Journal of Economics and Business, 42, 171–182. google scholar
  • Sehgal, S. & Agrawal, T. J. (2017). Bank risk factors and changing risk exposures in the pre- and post-financial crisis periods: An empirical study for India, Management and Labour Studies, 42(4), 356-378. google scholar
  • Yourougou, P. (1990). Interest rate and the pricing of depository financial intermediary common stock: empirical evidence, Journal of Banking & Finance, 14, 803–820. google scholar

Atıflar

Biçimlendirilmiş bir atıfı kopyalayıp yapıştırın veya seçtiğiniz biçimde dışa aktarmak için seçeneklerden birini kullanın


DIŞA AKTAR



APA

Çelik, İ.E. (2020). The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies. İstanbul İktisat Dergisi, 70(1), 141-161. https://doi.org/10.26650/ISTJECON2020-0013


AMA

Çelik İ E. The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies. İstanbul İktisat Dergisi. 2020;70(1):141-161. https://doi.org/10.26650/ISTJECON2020-0013


ABNT

Çelik, İ.E. The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies. İstanbul İktisat Dergisi, [Publisher Location], v. 70, n. 1, p. 141-161, 2020.


Chicago: Author-Date Style

Çelik, İsmail Erkan,. 2020. “The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies.” İstanbul İktisat Dergisi 70, no. 1: 141-161. https://doi.org/10.26650/ISTJECON2020-0013


Chicago: Humanities Style

Çelik, İsmail Erkan,. The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies.” İstanbul İktisat Dergisi 70, no. 1 (Jul. 2024): 141-161. https://doi.org/10.26650/ISTJECON2020-0013


Harvard: Australian Style

Çelik, İE 2020, 'The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies', İstanbul İktisat Dergisi, vol. 70, no. 1, pp. 141-161, viewed 18 Jul. 2024, https://doi.org/10.26650/ISTJECON2020-0013


Harvard: Author-Date Style

Çelik, İ.E. (2020) ‘The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies’, İstanbul İktisat Dergisi, 70(1), pp. 141-161. https://doi.org/10.26650/ISTJECON2020-0013 (18 Jul. 2024).


MLA

Çelik, İsmail Erkan,. The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies.” İstanbul İktisat Dergisi, vol. 70, no. 1, 2020, pp. 141-161. [Database Container], https://doi.org/10.26650/ISTJECON2020-0013


Vancouver

Çelik İE. The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies. İstanbul İktisat Dergisi [Internet]. 18 Jul. 2024 [cited 18 Jul. 2024];70(1):141-161. Available from: https://doi.org/10.26650/ISTJECON2020-0013 doi: 10.26650/ISTJECON2020-0013


ISNAD

Çelik, İsmailErkan. The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies”. İstanbul İktisat Dergisi 70/1 (Jul. 2024): 141-161. https://doi.org/10.26650/ISTJECON2020-0013



ZAMAN ÇİZELGESİ


Gönderim02.05.2020
Kabul09.05.2020
Çevrimiçi Yayınlanma30.06.2020

LİSANS


Attribution-NonCommercial (CC BY-NC)

This license lets others remix, tweak, and build upon your work non-commercially, and although their new works must also acknowledge you and be non-commercial, they don’t have to license their derivative works on the same terms.


PAYLAŞ




İstanbul Üniversitesi Yayınları, uluslararası yayıncılık standartları ve etiğine uygun olarak, yüksek kalitede bilimsel dergi ve kitapların yayınlanmasıyla giderek artan bilimsel bilginin yayılmasına katkıda bulunmayı amaçlamaktadır. İstanbul Üniversitesi Yayınları açık erişimli, ticari olmayan, bilimsel yayıncılığı takip etmektedir.