Financial Crisis and Changes in Determinants of Risk and Return: An Empirical Investigation of an Emerging Market (ISE)

Muradoglu, Gulnur; Berument, Hakan; Metin, Kivilcim

Volume 3, Number 4 / December , Pages 223-282

Multinational Finance Journal, 1999, vol. 3, no. 4, pp. 223-252

Gulnur Muradoglu , University of Manchester, U.K. Corresponding Author

Hakan Berument , Bilkent University, Turkey
Kivilcim Metin , Bilkent University, Turkey

Abstract:
This paper examines how determinants of volatility and stock returns change with financial crisis. The contributions of the paper are twofold. First, using a GARCH-M framework, risk and return are jointly modeled by using macroeconomic variables both in the variance and the mean equations. The conditional variance equation is specified by including macro-economic variables, a relevant information set for emerging economies, that is often overlooked in various GARCH specifications. Second, determinants of risk and return are investigated before during and after a major financial crisis at ISE. We show that, both the determinants of risk and the risk-return relationship change as the economy switches from one regime to the other

Keywords : emerging; financial crisis; GARCH-M; Istanbul Stock Exchange; macroeconomic variables; risk; stock returns
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