The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies

İsmail Erkan ÇELİK

doi:https://doi.org/10.26650/ISTJECON2020-0013

Makale detayları

The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies

Yazarlar:

İsmail Erkan ÇELİK

Yayıncı:

Istanbul University

Ana Başlıklar:

Yönetim

Dergi:

Istanbul Journal of Economics 2020 Vol.70 Issue 1, pp.141-161

Belge Tipi:

Makale

Yayın Tarihi:

6/2020

Belge Dili:

İngilizce

Document ID (Org No.):

2000510294

Sıklık:

İki Yıllık

eISSN:

2602-3954

pISSN:

2602-4152

DOI:

https://doi.org/10.26650/ISTJECON2020-0013

Özet:

 

This study examines the impact of exchange rate and interest changes on stock returns and volatility of Turkish insurance companies using the EGARCH model for the period of 01/01/2009 to 15/04/2020. The results show: (i) while interest rate has a negative and significant effect on the conditional stock return, its effect on the volatility of stock returns of insurance companies is limited; (ii) however, the exact opposite is true for the exchange rate risk. The exchange rate risk exerts an important impact on the volatility of insurance stock returns but it has no effect on the mean stock returns of insurance companies; (iii) the findings also indicate that the volatility of insurance stock returns are highly persistent over time and they are more sensitive to old news than recent surprises; (iv) positive and negative news have an asymmetric effect on volatility implying that positive innovations (good news such as a market) have a larger impact on current conditional variance (current volatility of returns) than negative innovations (bad news such as market stagnation) of the same magnitude; (v) finally, the volatility of insurance portfolio’s and insurance companies’ stock returns has risen significantly during the financial crisis of 2008 compared to the rest of the sample period.

 

This study examines the impact of exchange rate and interest changes on stock returns and volatility of Turkish insurance companies using the EGARCH model for the period of 01/01/2009 to 15/04/2020. The results show: (i) while interest rate has a negative and significant effect on the conditional stock return, its effect on the volatility of stock returns of insurance companies is limited; (ii) however, the exact opposite is true for the exchange rate risk. The exchange rate risk exerts an important impact on the volatility of insurance stock returns but it has no effect on the mean stock returns of insurance companies; (iii) the findings also indicate that the volatility of insurance stock returns are highly persistent over time and they are more sensitive to old news than recent surprises; (iv) positive and negative news have an asymmetric effect on volatility implying that positive innovations (good news such as a market) have a larger impact on current conditional variance (current volatility of returns) than negative innovations (bad news such as market stagnation) of the same magnitude; (v) finally, the volatility of insurance portfolio’s and insurance companies’ stock returns has risen significantly during the financial crisis of 2008 compared to the rest of the sample period.

Makale detayları

The Effects of Exchange Rate and Interest Rate Exposure on the Stock Returns and Volatility of Turkish Insurance Companies

Yazarlar: İsmail Erkan ÇELİK

Yayıncı: Istanbul University

Ana Başlıklar: Yönetim

Dergi: Istanbul Journal of Economics 2020 Vol.70 Issue 1, pp.141-161

Belge Tipi: Makale

Yayın Tarihi: 6/2020

Belge Dili: İngilizce

Document ID (Org No.): 2000510294

Sıklık: İki Yıllık

eISSN: 2602-3954

pISSN: 2602-4152

DOI: https://doi.org/10.26650/ISTJECON2020-0013

Sayı

Yazarlar:

İsmail Erkan ÇELİK

Yayıncı:

Istanbul University

Ana Başlıklar:

Yönetim

Dergi:

Istanbul Journal of Economics 2020 Vol.70 Issue 1, pp.141-161

Belge Tipi:

Makale

Yayın Tarihi:

6/2020

Belge Dili:

İngilizce

Document ID (Org No.):

2000510294

Sıklık:

İki Yıllık

eISSN:

2602-3954

pISSN:

2602-4152

DOI:

https://doi.org/10.26650/ISTJECON2020-0013