Graduate School of Business

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Browsing by Author "Lekpek, Senad"

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    PhD DissertationPublicationMetadata only
    Three essays on the behavior of equity market returns
    (2016-12) Lekpek, Senad; Kayaçetin, Nuri Volkan; Özsoy, Satı Mehmet; Kayaçetin, Nuri Volkan; Özsoy, Satı Mehmet; Yalçın, Atakan; Atılgan, Y.; Demirtaş, Ö.; Department of Business; Lekpek, Senad
    The first chapter of this thesis analyzes return comovements phenomena known as correlation asymmetry. The phenomena has its two manifests: asymmetric correlations, referring to stock return correlations being higher during downside movements than during upside movements, and counter-cyclical correlations, referring to correlations being higher during recessions than during boom periods. We show that, unlike the asymmetric correlations, the counter-cyclical correlations are driven by the counter-cyclical market volatility. This finding has important implications for understanding the correlation risk as well as modeling correlation asymmetry. The next two chapters investigate the turn-of-the-month (ToM) effect, a pattern of high returns around month-ends: the second chapter examines the presence of the effect in the G7 equity markets, while the last chapter focuses on the ToM effect in the Turkish market. We show that the ToM effect is statistically and economically significant in all G7 equity markets over 1998-2015, and in the Turkish equity market over 1988-2015. The effect is stronger following months with (a) significant information inflow and (b) above average market return. We find that the effect strengthens in the U.S. and Canada and weakens in the U.K, Germany, France, Italy, and Japan in the latter half of the sample. The effect also gains importance in the Turkish equity market over the later subsamples. Estimating an e-GARCH model with daily index returns, we link the ToM effect to a decline in expected volatility in the days leading up to month-turns. These findings provide support for the information-risk hypothesis wherein the resolution of uncertainty towards reporting deadlines leads to a reduction in expected risk premiums, sending equity valuations up.