Hidden Cointegration among Borsa Istanbul Sector Indices

Authors

1 Faculty of Applied Sciences, Department of Banking and Finance, Tarsus University, Mersin, Turkey.

2 Vocational High School, Department of Banking-Finance and Insurance, Tarsus University, Mersin, Turkey.

Abstract

In this study, the cointegration relationship between the financial, industrial, services and technology indices in Borsa Istanbul is analyzed by employing the Johansen cointegration test and Hatemi-J & Irandoust (2012) hidden cointegration test. Daily data cover the period 2nd January 2012 to 24th September 2018. While the Johansen cointegration test indicates no cointegration, the Hatemi-J & Irandoust test showed that there is a hidden cointegration among the four indices. Accordingly, an increase or decrease in the index prices will be effective in the formation of other index prices. Thus, it is not possible to diversify within the Turkish stock market. 
 

Keywords