WHAT ARE THE MACROECONOMIC DRIVERS OF THE ASSET RETURNS OF TURKISH BANKS?

Abstract

The aim of this paper is to investigate the effects of the macroeconomic factors to the movements of the asset returns of the banks in Turkey in terms of systemic risk from 2005 to 2018. In the study, Independent Component Analysis is applied for extracting driving factors of the asset returns of Turkish banks by decomposing the returns into its components. After examining the relationship between the independent components and the macroeconomic variables, the results conclude that one component shows strong similarities with the well-known stock market index of Turkey, namely the BIST100. Besides, the BIST100 is observed as the most important macroeconomic indicator affecting the movements of the asset returns. From systemic risk perspective, the BIST100 and the exchange rate from US dollar to Turkish lira are interpreted as two macro factors that contribute to the systemic risk of Turkish banks. When it is reviewed the regression results of the estimated independent components with the macroeconomic variables, it is found that while the BIST100 affects the asset returns of Turkish banks on its own, three macroeconomic factors (the credit default swap spreads of Turkey, the exchange rate and volatility) jointly affect the banks by creating a chain effect.