The Stock Market’s Reaction to the Surprises in Inflation Announcements in Turkey
Journal Title: Journal of the Human and Social Science Researches - Year 2016, Vol 5, Issue 3
Abstract
Modern finance theory has focused on macroeconomic factors as sources of investment risk. If released macroeconomic variable is one of the systematic risk factors it is expected that surprises (innovation or news) about the variable will impact on the stock returns. As a source of systematic risk, inflation is one the important macroeconomic variables. The aim of this study is to determine whether the surprises in inflation announcements (the difference between expected and actual inflation) is priced in the stock market or not. For this purpose, monthly expected and actual CPI data between January 2000 and February 2016, and BIST 100 Index were used in the study. By employing event study methodology in the analysis it is found that there are abnormal returns but they don’t continue systematically and particularly in the event day it is not significant. There is also found in the study that expected, actual and unexpected inflation couldn’t explain changes in the abnormal returns.
Authors and Affiliations
Muhammet BELEN| Yrd. Doç. Dr., Karabük Üniversitesi İİBF mbelen@karabuk.edu.tr, Ümit GÜMRAH| Doç. Dr., Abant İzzet Baysal Üniversitesi, İİBF gumrah_u@ibu.edu.tr
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