The Relationship Between Disaggregated Country Risk Ratings and Stock Market Movements: An ARDL Approach

SARI R., UZUNKAYA M., Hammoudeh S.

EMERGING MARKETS FINANCE AND TRADE, vol.49, no.1, pp.4-16, 2013 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 49 Issue: 1
  • Publication Date: 2013
  • Doi Number: 10.2753/ree1540-496x490101
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.4-16
  • Keywords: ARDL, economic risk, financial risk, political risk, risk ratings, stock market, POLITICAL RISK
  • Middle East Technical University Affiliated: Yes


We examine the relationships between disaggregated country risk ratings and stock market movements in Turkey, using the autoregressive distributed lag approach. The long- and short-run relationships between stock market movements and political risk, financial risk, and economic risk components of country risk ratings are investigated. The presence of a long-run relationship between Turkey's risk ratings and stock market movements is confirmed. In the long run, Turkey's three economic, financial, and political risk rating components are the forcing variables of stock market movements. However, in the short run only the reduced political and financial risk rating components have positive and significant impact on market movements. Policy implications are also discussed.