The relationship of Participation30 and BIST100 indices with interest and exchange rate: Quantile regression method

Unfortunately, unlike the real sector, the financial sector forms the basis of development in Turkey and other countries with an unstable and sensitive economic structure. A very voluminous part of the financial sector consists of interest-bearing transactions, and the economy built on this interest system brings with it some deadlocks in the long run. Various studies on Islamic indices, which is one of the recent applications of Islamic finance, which is an alternative to interest-bearing finance, say that it has no limitations in terms of reliability, as it is thought, and that it has less risks compared to interest-bearing indices. As a matter of fact, when the participation finance is analyzed by participation banks and special financial institutions, it has been revealed that it has given much more positive reactions to the economic crises than expected. Today, it is a matter of curiosity whether the same applies to the Participation Index. One of the claims that has been strong so far is that Islamic indices will not be affected by high interest rates due to its origin, and therefore, it will not be hit hard by the crises most of which have been caused by high interest rates. In this study, considering these shortcomings, the effect of exchange rate and interest on Conventional-Islamic indices was comparatively examined in order to contribute to the literature, while at the same time, it was analyzed how the stock market was affected by exchange rate and interest variables in strong-normal-weak periods with the quantile regression method. According to the quantile regression results: • The interest rate variable affects the Participation 30 index positively in the bear market period, but negatively in the normal period. • In the BIST100 index, the interest rate has a negative effect in bear and bull markets. • Exchange rate negatively affects the Participation 30 index only in the bull market. • Exchange rate affects BIST100 negatively in all markets.