ISE REVIEW

Relative Price Variability and Inflation: Empirical Evidence from Turkey
Meral Karasulu

Abstract
This paper presents empirical evidence on the relationship between inflation and relative price variability (RPV) using disaggregated store level price data for Istanbul, Izmir and Ankara for the 1991-1996 period. Both intermarket and intramarket dimensions of relative price variability are analyzed. Up to 95% of total variation in inflation rates is due to the within market variation of inflation. I find robust evidence for a positive correlation between inflation and relative price variability. For intermarket variation this relationship is strengthened by the skewness of relative price changes.

Abstract
In this paper, the series of two National-100 indices of Istanbul Stock Exchange (ISE) based on TL (Turkish Lira) and U$ (US Dollars) were statistically analyzed, and modeled using time series methods. For this aim, first, linearity and normality of each series were tested by using the likelihood ratio and goodness of fit tests. Then, after necessary transformations were made on the data, the nonseasonal IMA (2,1) model based on TL and the seasonal ARIMA (0,1,0)(0,1,1) model based on Dollar were obtained for the series of National-100 of ISE.

Abstract
Since economic agents make the decisions based on the perceived distribution of the random variables in the future, assessment and measurement of the variance has a significant impact on their course of action. Therefore, market participants’ ability to accurately measure and predict the stock market volatility has wide spread implications. This capability has a particular importance in an environment, where the perception of high levels of volatility has the potential to erode the investor confidence and divert the capital inflows from equity markets. This is a particular concern for the emerging equity markets that lack the advanced institutional and informational infrastructures and which are very vulnerable to domestic and foreign capital flows. The purpose of this study is to determine the time-varying characteristics of volatility in an emerging stock market by utilizing rich family of ARCH models. The primary focus of the study is to explore the nature of volatility in the ISE.

Abstract
This study examines the daily seasonalities in Turkish Money Markets. Day-of-the week effects in overnight interest rates in the Central Bank Interbank Money and Istanbul Stock Exchange Repo Markets are investigated. Results show that overnight interest rates significantly fall on Wednesdays and increase on Mondays relative the previous days which indicated the existence of significant day-of-the-week-effect in overnight interest rates. There are also two other strong trends in interest rates indicate the decrease on Tuesdays and increase on Fridays. Some evidences are documented for the relationship between the existence of day effect in overnight interest rates and Treasury Public Borrowing Auctions, institutional practices, strategies of market participants and the other factors which effect the liquidity conditions of the market and create the seasonality in liquidity. Findings are consistent with the liquidity conditions of the market, the liquidity and so money policy of the Central Bank and Treasury Auction-related practices for the day-of-the-week effect in overnight interest rates which shows that regulatory bodies of the markets and public authorities have an important creative impact on the seasonalities in interest rates.

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