How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model
This study aims to investigate the effect of the credit default swap (CDS) on the Turkish stock market. More specifically, it analyses whether the relationship between CDS and the Turkish stock market has changed during the period of unprecedented stock returns in 2022. The Markov Switching GARCH me...
Saved in:
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Istanbul University Press
2023-06-01
|
| Series: | İstanbul İktisat Dergisi |
| Subjects: | |
| Online Access: | https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/D767F546FE304FEBA0F9F7DF44DDECF5 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1849728589977616384 |
|---|---|
| author | Veysel Karagöl |
| author_facet | Veysel Karagöl |
| author_sort | Veysel Karagöl |
| collection | DOAJ |
| description | This study aims to investigate the effect of the credit default swap (CDS) on the Turkish stock market. More specifically, it analyses whether the relationship between CDS and the Turkish stock market has changed during the period of unprecedented stock returns in 2022. The Markov Switching GARCH method is preferred because of its many advantages in the analysis of the return series of the variables. Two different models are estimated for the full sample weekly period of 2010:01-10/2022:12-11 and the subsample weekly period of 2010:01-10/2021:12-05. The subsample period is more optimal than the full sample period. Nevertheless, the findings of both sample periods are included to make a comparison. The effect of CDS on the Turkish stock market is greater in the high-volatility regime than in the lowvolatility regime. CDS has a negative impact on the Turkish stock market in both low and high volatility periods. The most striking finding is that CDS affects the Turkish stock market approximately twice as much in the subsample period as in the full sample period in both regimes. Policymakers should follow risk-oriented policies instead of policies against the wind against the risk of a possible boom in financial markets. |
| format | Article |
| id | doaj-art-ea4efa220d0d4a75869c6eec3429f9be |
| institution | DOAJ |
| issn | 2602-3954 |
| language | English |
| publishDate | 2023-06-01 |
| publisher | Istanbul University Press |
| record_format | Article |
| series | İstanbul İktisat Dergisi |
| spelling | doaj-art-ea4efa220d0d4a75869c6eec3429f9be2025-08-20T03:09:31ZengIstanbul University Pressİstanbul İktisat Dergisi2602-39542023-06-0173151353210.26650/ISTJECON2022-1223833123456How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH ModelVeysel Karagöl0https://orcid.org/0000-0001-9939-0173Van Yüzüncü Yıl Üniversitesi, Van, TurkiyeThis study aims to investigate the effect of the credit default swap (CDS) on the Turkish stock market. More specifically, it analyses whether the relationship between CDS and the Turkish stock market has changed during the period of unprecedented stock returns in 2022. The Markov Switching GARCH method is preferred because of its many advantages in the analysis of the return series of the variables. Two different models are estimated for the full sample weekly period of 2010:01-10/2022:12-11 and the subsample weekly period of 2010:01-10/2021:12-05. The subsample period is more optimal than the full sample period. Nevertheless, the findings of both sample periods are included to make a comparison. The effect of CDS on the Turkish stock market is greater in the high-volatility regime than in the lowvolatility regime. CDS has a negative impact on the Turkish stock market in both low and high volatility periods. The most striking finding is that CDS affects the Turkish stock market approximately twice as much in the subsample period as in the full sample period in both regimes. Policymakers should follow risk-oriented policies instead of policies against the wind against the risk of a possible boom in financial markets.https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/D767F546FE304FEBA0F9F7DF44DDECF5credit default swapturkish stock marketmarkov switching garch |
| spellingShingle | Veysel Karagöl How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model İstanbul İktisat Dergisi credit default swap turkish stock market markov switching garch |
| title | How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model |
| title_full | How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model |
| title_fullStr | How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model |
| title_full_unstemmed | How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model |
| title_short | How Vulnerable is the Turkish Stock Market to the Credit Default Swap? Evidence from the Markov Switching GARCH Model |
| title_sort | how vulnerable is the turkish stock market to the credit default swap evidence from the markov switching garch model |
| topic | credit default swap turkish stock market markov switching garch |
| url | https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/D767F546FE304FEBA0F9F7DF44DDECF5 |
| work_keys_str_mv | AT veyselkaragol howvulnerableistheturkishstockmarkettothecreditdefaultswapevidencefromthemarkovswitchinggarchmodel |