The cointegration between stock markets

In the globalizing world economy, as a result of increased financial liberalization, political and economic developments which are formed in the countries, may affect the associated exchanges in other countries in a very short period of time and even simultaneously. In portfolios which are generated to diversify in order to reduce risk in investments, investments are directing to different investment instruments or different securitiesin order to make this diversification. However, for international investments, it is possible to avoid the country risks by making this diversification. For this purpose, absence of the co-integration relationship between the invested stock markets while making the investments is important for investors to be protected from risks. In this context, the co-integration relationship between Turkey stock market (BIST) and developed stock markets has examined. Johansen co-integration test has been used in order to examine the co-integration relationship and the causality between stock markets has examined with the Granger causality test. In addition, the identifying statistics between the countries has been shown in a table. The purpose of this study is to examine the co-integration relationship between stock markets.