Theses and Dissertations - UTB/UTPA

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Dr. Gökçe A. Soydemir

Second Advisor

Dr. Jose A. Pagan

Third Advisor

Dr. Hale Kaynak


Emerging stock markets play an important role in portfolio diversification. Accurate depiction of their status is essential for potential investment assessment. This dissertation focuses on two important aspects of emerging markets using Istanbul Stock Exchange (“ISE”) as an example: modeling stock return volatility as a measure of risk and exploring potential interaction between stock returns and consumer/business sentiments. ISE is selected as it has no entry restrictions and offers great investment potential with 65% foreign participation.

The first essay focuses on stock return volatility. Potential asymmetric behavior is investigated by looking into how the ISE National-100 Index prices evolve over time and how market participants react to sudden good or bad news. Whether these reactions are priced in the ISE National-100 Index is also confirmed. There are three distinctions from previous studies: (1) Student’s t distribution is used in error terms, which is more suitable for non-linear data, (2) Both magnitude and direction of asymmetry is analyzed rather than just direction, and (3) the longer sample period allows more in-depth analysis. The findings suggest that the ISE is inefficient with strong dependencies in stock prices and depicts persistent and asymmetric volatility behavior.

The second essay investigates the bidirectional relationship between consumer/business sentiments and the ISE National-100 Index returns. This is the first study in ISE that treats the sentiment as a joint function of fundamentals-driven and irrationality-driven risk factors and probes the concurrent impact of each component on the ISE National-100 Index returns. It also extends the current literature by incorporating the capital asset pricing model into the calculation of excess returns to validate the findings’ robustness. The findings for the second essay support the rational expectations theory that fundamental risk factors have more pronounced and significant effects on stock returns than irrational risk factors. Dissertation’s findings imply that the ISE has significant potential for future growth as the number of participants and efficiency increase in the market.


Copyright 2011 Sidika Gülfem Bayram. All Rights Reserved.

Granting Institution

University of Texas-Pan American