Correlation Analysis Between Borsa Istanbul Bank Stocks and Bist-100 Index

The share price of a bank may be affected by the general market sensitivity, future expectations, basic valuations and similar basic factors affecting the share prices of companies belonging to other sectors. However, bank shares may separate from company shares operating in other sectors, depending on factors such as central bank activities and the increase or decrease in demand for banking services across the entire economy. This paper primarily aims to analyze the characteristics of time-variation in daily correlation coefficients of companies whose stocks are traded at the Bourse Istanbul. We use daily data for selected companies for the period 2002 to 2019. Daily correlation coefficients are computed using a twenty-day rolling estimation window. The empirical results show that daily correlation is highly volatile across time and significantly differs across banks. In this context, considering the minimum and maximum correlation values, Halk Bank shows full negative correlation with BIST-100 index while Albarakatürk, Denizbank and Vakıflar Bank show full positive correlation with BIST-100 index. When the average correlation coefficients are analyzed, while Denizbank shares show the lowest twenty-day average correlation, Garanti Bank and İşbank (C) shares have the highest average correlations. As being an emerging financial market, while providing greater economic and financial opportunities in line with investor expectations, Borsa İstanbul has higher risk compared to developed financial markets. To this end, this study contributes to financial asset managment and risk management for Borsa İstanbul.

Keywords

Finance, stock market, asset management, risk management, banking