The Role of Monetary Policy Announcements on Turkish Banks' Stock Returns

Authors

  • Nida Abdioğlu Bandirma Onyedi Eylul University
  • Sinan Aytekin Balikesir University

DOI:

https://doi.org/10.5195/emaj.2016.98

Keywords:

Monetary Policy, Cumulative Abnormal Returns, Event Study, Emerging Markets, Borsa Istanbul

Abstract

This paper investigates the impact of monetary policy committee decisions of the Central Bank of the Republic of Turkey on the stock returns of the deposit banks listed in Borsa Istanbul Banks Index (XBANK). The cumulative abnormal returns of the banks are calculated for 2008 and 2012. We report that the monetary policy announcements affect cumulative abnormal returns of the deposits banks both in 2008 and 2012. Since the announcement of the monetary policy decisions created abnormal returns, we conclude that the market does not have semi-strong form efficiency.

References

Aktaş, Z., Alp, H., Gürkaynak, R., Kesriyeli, M. & Orak, M. (2009). Türkiye’de Para Politikasının Aktarımı: Para Politikasının Mali Piyasalara Etkisi. İktisat, İşletme ve Finans, 24 (278), 924.

Andersson, M. (2010). Using Intraday Data to Gauge Financial Market Responses to Federal Reserve and ECB Monetary Policy Decisions. International Journal of Central Banking, 6(2), 117-145.

Bernanke, B., & Kuttner, K. (2005). What Explains the Stock Market’s Reaction to Federal Reserve Policy? Journal of Finance, 60 (3), 1221-1257.

Bohl, M.T., Siklos, P.L. & Sondermann, D. (2008). European Stock Markets and the ECB's Monetary Policy Surprises. International Finance, 11 (2), 117-130.

Bomfim, A. (2003). Pre-announcement Effects, News Effects and Volatility: Monetary Policy and The Stock Market. Journal of Banking and Finance, 27 (1), 133-151.

Chulia, H., Martens, M. & Dijk, D. (2010). Asymmetric Effects of Federal Funds Target Rate Changes on S&P100 Stock Returns, Volatilities and Correlations. Journal of Banking and Finance, 34 (4), 834-839.

Demiralp, S. & Yılmaz, K. (2010). Para Politikası Beklentilerinin Sermaye Piyasaları Üzerindeki Etkisi. TÜSİADKOÇ University Economic Research Forum Working Paper Series. No:1008

Duran, M., Özcan, G., Özlü, P. & Ünalmış, D. (2012). Measuring the Impact of Monetary Policy on Asset Prices in Turkey. Economics Letters, 114, 29-31.

Ehrmann, M. & M. Fratzscher (2004). Taking Stock: Monetary Policy Transmission to Equity Markets. European Central Bank Working Paper Series, No: 354.

Ehrmann, M., Fratzscher, M. & Rigobon, R. (2005). Stocks, Bonds, Money Markets and Exchange Rates: Measuring International Financial Transmission. NBER Working Paper Series No:11166.

Fama, F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25 (2), 383-417.

Farka, M. (2009). The Effect of Monetary Policy Shocks on Stock Prices Accounting for Endogeneity and Omitted Variable Biases. Review of Financial Economics, 18, 47–55.

Hussain, S. M. (2011). Simultaneous Monetary Policy Announcements and International Stock Markets Response: An Intraday Analysis. Journal of Banking & Finance, 35 (3), 752-764.

Ibicioglu, M. & Kapusuzoglu, A. (2012). An Empirical Analysis of Impact of Central Bank Policy Interest Rate on the Decisions of Share Investors: Evidence from Turkey. Procedia - Social and Behavioral Sciences, 62, 489 – 493.

Jensen,G.R., Johnson,R.R., & Mercer, J.M. (1996). Business Conditions, Monetary Policy, and Expected Security Returns. Journal of Financial Economics, 40, 213–237.

Karan, Mehmet B. (2003). Yatırım Analizi ve Portföy Yönetimi. Gazi Kitabevi, Ankara.

Kholodilin, K., Montagnoli, A., Napolitano, O. & Siliverstovs, B., 2009. Assessing the Impact of the ECB’s Monetary Policy on the Stock Markets: A Sectoral View. Economics Letters, 105, 211– 213.

Kucukkocaoglu, G., Unalmis, D. & Unalmis, I. (2013). How Do Banks’ Stock Returns Respond to Monetary Policy Committee Announcements in Turkey? Evidence from Traditional versus New Monetary Policy Episodes. Central Bank of the Republic of Turkey Working Paper, No: 13/30.

Patelis, A. D. (1997). Stock Return Predictability and the Role of Monetary Policy. Journal of Finance, 52 (5), 1951–72.

Rigobon, R., & Sack, B. (2003). Measuring the Reaction of Monetary Policy to the Stock Market. Quarterly Journal of Economics, 118, 639–70.

Rigobon, R. & B. Sack (2004). The Impact of Monetary Policy on Asset Prices. Journal of Monetary Economics, 51(8), 1553–1575.

Scharler, J. (2008). Bank Lending and the Stock Market's Response to Monetary Policy Shocks. International Review of Economics and Finance, 17 (3), 425-435.

Soylu, N., Korkmaz, T. & Cevik, E.I. (2014). Merkez Bankası Faiz Duyurularının Finansal Piyasalara Etkisi. Business and Economics Research Journal, 5(4), 89-118.

Downloads

Published

2016-02-02

Issue

Vol. 6 No. 1 (2016)

Section

Articles

License

Authors who publish with this journal agree to the following terms:

  1. The Author retains copyright in the Work, where the term “Work” shall include all digital objects that may result in subsequent electronic publication or distribution.
  2. Upon acceptance of the Work, the author shall grant to the Publisher the right of first publication of the Work.
  3. The Author shall grant to the Publisher and its agents the nonexclusive perpetual right and license to publish, archive, and make accessible the Work in whole or in part in all forms of media now or hereafter known under a Creative Commons Attribution 4.0 International License or its equivalent, which, for the avoidance of doubt, allows others to copy, distribute, and transmit the Work under the following conditions:
    1. Attribution—other users must attribute the Work in the manner specified by the author as indicated on the journal Web site;
    with the understanding that the above condition can be waived with permission from the Author and that where the Work or any of its elements is in the public domain under applicable law, that status is in no way affected by the license.
  4. The Author is able to enter into separate, additional contractual arrangements for the nonexclusive distribution of the journal's published version of the Work (e.g., post it to an institutional repository or publish it in a book), as long as there is provided in the document an acknowledgement of its initial publication in this journal.
  5. Authors are permitted and encouraged to post online a prepublication manuscript (but not the Publisher’s final formatted PDF version of the Work) in institutional repositories or on their Websites prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work. Any such posting made before acceptance and publication of the Work shall be updated upon publication to include a reference to the Publisher-assigned DOI (Digital Object Identifier) and a link to the online abstract for the final published Work in the Journal.
  6. Upon Publisher’s request, the Author agrees to furnish promptly to Publisher, at the Author’s own expense, written evidence of the permissions, licenses, and consents for use of third-party material included within the Work, except as determined by Publisher to be covered by the principles of Fair Use.
  7. The Author represents and warrants that:
    1. the Work is the Author’s original work;
    2. the Author has not transferred, and will not transfer, exclusive rights in the Work to any third party;
    3. the Work is not pending review or under consideration by another publisher;
    4. the Work has not previously been published;
    5. the Work contains no misrepresentation or infringement of the Work or property of other authors or third parties; and
    6. the Work contains no libel, invasion of privacy, or other unlawful matter.
  8. The Author agrees to indemnify and hold Publisher harmless from Author’s breach of the representations and warranties contained in Paragraph 6 above, as well as any claim or proceeding relating to Publisher’s use and publication of any content contained in the Work, including third-party content.

Revised 7/16/2018. Revision Description: Removed outdated link.