Business and Economics Research Journal

1-17

Authors: Aparna Bhat, Kirti Arekar

The objective of this paper is to examine efficiency of the exchange-traded currency options market in India. Put-call-futures parity for the USD-INR currency options is studied by analyzing daily closing prices of options and futures for thirty two months on the National Stock Exchange. The study reveals frequent violations of the put-call-futures parity creating significant arbitrage opportunities. The pattern of mispricing varies when examined for time to maturity, option moneyness, liquidity and volatility of the underlying asset. These observations are consistent with those of studies of other young markets.

39-53

Authors: İbrahim Yaşar Gök, Şeref Kalaycı

The heat wave hypothesis is that a market’s return and volatility are explained with its past values and are determined by country-specific effects. The meteor shower hypothesis refers that a market’s return and volatility can not be explained just with its past values and there are return and volatility spillovers to a market from others. In this study, the heat wave and meteor shower hypotheses are tested for Turkish and US index futures markets. In this context, the cointegration relationship and the return and volatility spillovers between markets are examined for 2010-2012 period using daily data with applying Johansen cointegration test and multivariate generalized autoregressive conditional heteroskedasticity model. In the study, the finding is reached that there is no long term relationship between US and Turkish markets. In terms of return spillovers across markets, there are one way spillovers from US market to Turkish market. The results for volatility spillovers across markets indicate that there are one way shocks spillovers from US market to Turkish market volatility. Thus, it is concluded that as US market supports the heat wave hypothesis, the Turkish market supports the meteor shower hypothesis. These results reflect the difference of information processing of markets and the US market is more informationally efficient.

71-95

Authors: Fatih Çiftci, Rıfat Yıldız

The aim of this study is to empirically analyze the factors that might affect foreign direct investment flows into the Turkish economy using the data for the period of 1974-2012 within the framework of relevant theoretical approaches and interpret the results with regard to the Turkish economy. At the beginning of the empirical analysis, time-series properties of the variables in question are analyzed, and all of the variables except for trade deficit are detected to be difference-stationary while trade deficit variable is found stationary at its level. Empirical findings obtained by the ARDL bounds testing approach reveal that there is a long-term level relationship between the variables. The findings of the error correction model support the existence of the long-term relationship. The long-term findings indicate that the variables gross domestic product, real exchange rate and financial development positively affect foreign direct investment while the effects of trade deficit and external debt are negative. The impact of the variable trade openness is, on the other hand, found insignificant while it is also positive. Furthermore, the Toda-Yamamoto causality test results assert the existence of a long-run causality running from gross domestic product representing the market size to foreign direct investment. Empirical findings indicate that one of the most important factors affecting foreign direct investment is the market size, and in this regard the market size hypothesis is supported.