ISE review

Istanbul Stock Exchange

Volume 10 No:38

Subjects

Multiscale Systematic Risk:an Application on the ISE-30
Atilla Çifter & Alper Özün

Exchange Rate Exposure:A firm and Industry Level Investigation
Sadık Çukur

Inflation Targeting According to Oil and Exchange Rate Shocks
Cem Mehmet Baydur

Global Capital Markets

ISE Market Indicators

ISE Publication List

MULTISCALE SYSTEMATIC RISK:AN APPLICATION ON THE ISE-30

Atilla ÇİFTER
Alper ÖZÜN

In this study, variance changing to the scale and multi-scale Capital Asset Pricing Model (CAPM) is tested by Wavelets as a new analysis method in finance and economics. It introduces a new approach to the variance changing to the scale as a general risk indicator, and to multi-scale CAPM portfolio theory as a systematic risk indicator. In the study, variance changes to scale and systematic risk changes to scale of 10 stocks in the ISE-30 have been determined. The ability of the investors to conduct risk based analysis up to 128 days allows them to determine the risk level to the scale (stock holding period).

According to the study results; it is determined that the variances of 10 stocks from the ISE 30 change according to the scale and variance differentiation as an expression of general risk level increase starting from the 1st scale (1 to 4 days). In multi-scale CAPM, it is determined that systematic risk of all stocks is changed to frequency (scale) and increased at higher scales. The finding as to beta and return at the high levels shall be in stronger form evidenced by Gencay et al (2005) is determined as not applicable to the ISE 30. The risk and return for the ISE-30 are close to the positive in the 3rd scale (32 days), but they are in the same direction for the other scales. This finding shows that the risk-return maximization of a portfolio of 10 stocks from the ISE may be achieved at a level of 32 days and the risk will be higher than the return in the portfolios established at those levels different than 32 days.

EXCHANGE RATE EXPOSURE:A FIRM AND INDUSTRY LEVEL INVESTIGATION

Sadık ÇUKUR

Abstract
Exchange rate exposure has become one of the most important subjects in international finance area after collapsing fixed exchange rate system. Several studies have been devoted to explore the relationship between exchange rate changes and the value of the firm. This study aims to investigate this relationship in the Istanbul Stock Exchange Market. The results of univariate model and multivariate models indicate that 30 % of the firms are affected negatively against exchange rate changes. The results are very sensitive to the chosen model and sub-period test results imply that exposure has a time-varying character.

INFLATION TARGETING ACCORDING TO OIL AND EXCHANGE RATE SHOCKS

Cem Mehmet BAYDUR

Abstract
Unless current output is not equal to potential output in an economy, inflation targeting cannot be zero. The minimum rate of inflation target is determined by the level of economic distortion rate. Briefly, economic distortion can be defined as all kind of events and regulations that reduces the efficiency of price mechanism. While shocks are included to the analysis of inflation targeting with distortions, the central bank is compelled to make a choice between inflation and output stability. If the shocks are permanent, they cause serious economic distortions. Under these circumstances, central bank has to revise its inflation target. The main purpose of this work is to analyze how exchange rate and oil shocks affect inflation and how these shocks affect the inflation targeting in the Turkish economy. The econometric determinations of this work emphasize that exchange rate shocks affect inflation target positively in the long run. On the other hand, petrol shocks will lead The Central Bank of the Republic of Turkey to revise its inflation targets.