Co-integration Analysis between the Turkish Stock Market and its Balkan Hinterland Equivalents: Proof From the 2010-2015 Period

Abstract: The purpose of this study is to investigate whether there is a co-integration amongst (3) three Balkan countries; Bosnia Herzegovina, Macedonia and Turkey in relation to the German stock market (important for the Europe scale). For this purpose, the relevant stock market’s weekly closing values (in the time series) were analyzed between the periods of September 2010 and August 2015. The long-term co-integrated relationship is analyzed by the Johansen Juselius Co-integration Test. The empirical results show that these three Balkan countries have a meaningful, but moderate relationship in reference to the stock markets. In addition, the German stock market has a more powerful effect on the Turkish stock exchange in comparison to the Bosnia Herzegovinian and Macedonian stock exchanges. This paper suggests that international investors can diversify their portfolios in these (3) three Balkan stock markets. Keywords: the Balkans, emerging stock markets, indexes, market linkages, co-integration analysis