Relation of exchange rates to various stock exchange indices: An application on BIST

Exchange rates are one of the preliminary factors that affect the decisions of all companies, especially companies engaged in international trade. The purpose of this study is to reveal the relationship between different stock market indices and exchange rates. In the study, BIST 100, the main index of Borsa Istanbul, as well as seven sub-indices selected from different sectors, including Food, Metal, Chemistry, Industry, Technology, Textile and Tourism Index, were included in the analysis as dependent variables. As an independent variable, the most frequently used dollar / TL and Euro / TL exchange rates in international trade in our country were selected and monthly data for the period between January 2008 and December 2018 were analyzed. Although there are many studies in the literature examining the relationship between exchange rates and stock prices, there is no consensus regarding the existence and dimensions of the relationship. In this study, the relationship between variables was tried to be revealed with the Fourier Cointegration method, which is rarely used in previous studies. As a result of the study, the hypothesis of the existence of a long-term cointegration relationship between the exchange rates selected and BIST 100 and other sector indices was accepted. When the coefficients are analyzed, it is seen that the relationship between BIST 100 and food index is meaningless, where the relationship between the dollar / TL exchange rate and the metal, chemistry, industry, technology, textile and tourism index is significant. In addition, according to the coefficients, the relationship between the Euro / TL exchange rate and the tourism index was found only significant, while the relationship between the other indices was not significant. Keywords: Stock Market, BIST 100 Index, Exchange Rate, Fourier Cointegration Test