Relationship between macroeconomic variables and stock market: An econometric analysis with structural break tests on the Turkish economy

The macroeconomic indicators concerning the socio-economic structure of the whole country such as national income, inflation, unemployment and growth affect all units operating in the country, especially investors and policy makers. Both producers and financial markets take position according to these indicators. Finance and manufacturing sectors, which have a strong correlation, create added value with accurate forecasts based on macroeconomic indicators. Therefore, stability in a country's macroeconomic indicators is an important competitive factor even in global markets. This study examines the relationship between macroeconomic indicators and the stock market. Stock exchanges are the most potential area among financial markets. With developing countries like Turkey, it is necessary to correctly analyze the factors affecting the stock market indices because it is in the hands of foreign capital. The hypothesis of the study, which is constructed as "there is a long-term relationship between the selected macroeconomic indicators and the stock market", is analyzed by econometric tests that allow structural break. In this context, the stability of the series was tested with ADF and PP tests as well as the Zivot Andrews test, which allows single structural breakage . Subsequently, the ARDL limit test was used to determine the long-term relationship between the variables, and Toda-Yamamato Causality tests were used to determine the causality relationship between the variables. As a result of the analyzes, long-term cointegration relationship was observed between the stock market and selected macroeconomic variables. According to the causality tests, one-way causality relationship was detected from the stock market to the interest rates and one-way causality from the stock market to unemployment.