Analysis of international diversification opportunities between Borsa İstanbul and selected Gulf country capital markets

The aim of this study is to investigate whether there is a long run co-integration relationship between the Turkish Stock Market and the Gulf Co-Operation Council (GCC) member, United Arab Emirates, Saudi Arabia, Kuwait, Jordan, Oman, Qatar and Bahrain Stock Markets, and to provide a resource where market opportunities for diversification can be exploited when evaluating investment decisions for potential Arab Investors. Johansen Co-Integration Method was selected as the research method for the purpose stated. Prior to the start of the analysis, Descriptive Statics and Correlation Coefficients of the countries were examined and whether the country indices used in research were stable at the level were investigated by the Augmented Dickey-Fuller and Phillips-Perron Unit Root Tests. Wald causality test was used to determine the relationships. The date range has been reviewed and detailed in two terms as 04.01.2006-31.12.2010, and 05.01.2011-31.12.2015. There were 522 observations for each index and 4698 observations for 9 indices. Turkey's data was obtained from www.borsaistanbul.com, Kuwait's data from www.kuwaitse.com and from other countries included in the survey are obtained from www.marketstoday.net. As a result of the analysis, 5% long run cointegration relation was found between Turkey and the Gulf Economic Union member, UAE, Jordan, Bahrain and Qatar including first and second periods. Two-way causality and relationship were found between Abu Dhabi, Dubai, Jordan, Oman, Qatar and Turkey. Moreover, Turkey was found to be financially co-integrated in the long term with the investigated Stock Markets. Markets moving in the same direction prevents investors from achieving maximum returns at the minimum risk level.