THE NEXUS OF GEOPOLITICAL RISK AND THE STOCK RETURNS; EVIDENCE FROM TURKEY USING WAVELET ANALYSIS.

Godwin Oluwatosin Yusuph, Ojo Johnson Adelakun, Emmanuel Oluwaseun Agboola

Abstract


This study evaluates the nexus between the stock market in Turkey; proxied with the Istanbul Stock Market and Geopolitical risk with the use of wavelet method. Monthly data ranging from January 1991 to March  2017 were used in the study. The Johansen cointegration test reveals that there exists no cointegration between the variables. Hence, the wavelet analysis was employed to account for the time-varying properties of the series. The result of the wavelet analysis shows that both the Istanbul Stock Market and Geopolitical Risk comove in the short run. The Toda- Yamamoto test used to check for causality shows that IST would lead to Geopolitical risk in the long run.


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ISSN : 2251-1555