Turkey credit default swap and at the base of the sectoral analysis of the relationship between stock prices

In this study, it is aimed to estimate the relationship between credit default swap premium and stock prices data. For this purpose, data set including weekly credit default swap premium and stock prices for BIST 100 and sub-sectors such as BIST service, BIST financial, BIST industrial, BIST technology were used for the period of 2013-2019. In order to test the long-term relationship between credit default swap premium and stock prices, Engle-Granger and Johansen-Juselius co-integration approaches were used in the study. According to the co-integration analysis, there are no the long-run relationship between credit default swap premium and sectoral stock price indices. The symmetrical and asymmetrical causality analyzes were used to reveal short-run dynamics. The causal relationship between series was investigated by using Granger (1969), Toda-Yamamoto (1995) and Hatemi-J (2002) causality approaches. According to short-term dynamics, there is a causality relationship from stock prices to credit default swap premium on some sub-sectors basis.