Determinants of Stock Return in BIST

In this study, we investigated the effect of macroeconomic variables on the volatility of Turkish stock market returns. We examined the effect of growth in gross domestic product, inflation, treasury bills rate, return on oil, exchange rate of major currencies against Turkish Lira, and contagion effect proxied for average of four major stock market returns most especially in United States, United Kingdom, Germany, and Japan. Using quarterly data from the periods 2002-2016, we carried out descriptive, correlation, and classical linear regression analysis. Empirical results show that there are three main determinants of Turkish stock market returns such as; return on oil, exchange rates, and contagion effect. Based on the results, we are of the opinion that, investors should speculate the fluctuations in oil price and monitor Turkish Lira against major currencies. Investors who are seeking international diversification benefits, especially through Turkey Lira should put into consideration impacts of contagion effect and other major stock market variables. Keywords: Turkish stock market, exchange rate, contagion effect