Research Article
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Year 2022, Volume: 15 Issue: 1, 131 - 133, 30.07.2022
https://doi.org/10.17261/Pressacademia.2022.1594

Abstract

References

  • Adjei, F. (2020). Effect of economic policy uncertainty on market risk and market risk premium. Journal of Finance and Economics, 8(2), 57- 60.
  • Ahn, S., & Shrestha, K. (2009). Estimation of market risk premium for Japan. Journal Name: Enterprise Risk Management, 1(1), 33-43.
  • Arismendi-Zambrano, J., & Azevedo, R. (2020). Implicit entropic market risk-premium from interest rate derivatives. Available at SSRN: https://ssrn.com/abstract=3654217.
  • Baghdadabad, M. R. T. (2017). Retraction note to: traditional beta, average drawdown beta and market risk premium. Journal of Asset Management, 18(2), 155-155.
  • Bali, T. G., Cakici, N., & Chabi-Yo, F. (2015). A new approach to measuring riskiness in the equity market: Implications for the risk premium. Journal of Banking & Finance, 57, 101-117.
  • Bhar, R., & Chiarella, C. (2007). A Model for the ex-ante UK stock market risk premium. Journal of Applied Quantitative Methods, 5(4), 599- 606.
  • Blasi, P., Cohen, A., & Simon, A. (2015). The determinants of historical property market risk premium in the London office market (No. eres2015_207). European Real Estate Society (ERES).
  • Bonga-Bonga, L. (2010). The assessment of market risk premium in South Africa. Journal of Applied Business Research (JABR), 26(6), 85-94.
  • Caporale, G. M., Gil-Alana, L. A., & Martin-Valmayor, M. (2021). Persistence in the market risk premium: evidence across countries. Journal of Economics and Finance, 45(3), 413-427.
  • Chalamandaris, G., & Rompolis, L. (2019). Recovering the market risk premium from stock and option prices. Available at SSRN: https://ssrn.com/abstract=2745879.
  • Chalamandaris, G., & Rompolis, L. S. (2021). Recovering the market risk premium from higher‐order moment risks. European Financial Management, 27(1), 147-186.
  • Chun, D., & Cho, H. (2019). Short interest and market risk premium: the case of the Korean market. Korean Journal of Financial Studies, 48(5), 541-566.
  • Du, D., & Hu, O. (2015). The world market risk premium and US macroeconomic announcements. Journal of International Money and Finance, 58, 75-97.
  • Fernández, P., Aguirreamalloa, J., & Acín, I. F. (2015). Required market risk premium among countries in 2012. The Journal of Finance and Data Science, 1(1), 42-54.
  • Fernandez, P., Aguirreamalloa, J., & Avendano, L. C. (2011). Market risk premium used in 56 countries in 2011: a survey with 6,014 answers. Available at SSRN 1822182: http://ssrn. com/abstract=1822182.
  • Fernández, P., Pershin, V., & Fernández Acín, I. (2017). Discount rate (risk-free rate and market risk premium) used for 41 countries in 2017: A survey. Available at SSRN: https://ssrn.com/abstract=2954142
  • Ferreira, T. S. V., Xavier, G. C., & Martins, O. S. (2018). Political uncertainty and risk premium in the Brazilian stock market. Journal of Financial Innovation, early view, 62. doi: https://doi. org/10.15194/jofi_201
  • Fleckenstein, M., & Longstaff, F. A. (2020). The Market Risk Premium for Unsecured Consumer Credit Risk (No. w28029). National Bureau of Economic Research. https://www.nber.org/papers/ w28029.
  • Graham, J. R., & Harvey, C. R. (2015). The Equity Risk Premium in 2015. Available at SSRN: https://ssrn.com/abstract=2611793. In Proceedings of Asia Conference on Business and Economic Studies (ACBES) by University of Economics Ho Chi Minh City on 8th–9th Sep 2018 at Ho Chi Minh City, Vietnam. UEH Publishing House, 62-71.
  • Harris, R. S., & Marston, F. C. (2013). Changes in the Market Risk Premium and the Cost of Capital: Implications for Practice. Journal of Applied Finance (Formerly Financial Practice and Education), 23(1). Available at SSRN: https://ssrn.com/abstract=2686739.
  • Johnson, R., & Soenen, L. (2009). Equity market risk premium and global integration. Journal of Centrum Cathedra, 2(1), 12-23. Available at SSRN: https://ssrn.com/abstract=1805161.
  • Kopchak, S. J. (2016). The regime-switching risk premium in the gold futures market. Journal of Economics and Finance, 40(3). 472-491.
  • Lally, M., & Marsden, A. (2004). Estimating the market risk premium in New Zealand through the Siegel methodology. Accounting Research Journal, 17(2), 93-101.
  • Lie, E., Meng, B., Qian, Y., & Zhou, G. (2017). Corporate activities and the market risk premium. Available at SSRN: https://ssrn.com/abstract=2911120
  • Naumoski, A., Arsov, S., Gaber, S., & Gaber-Naumoska, V. (2016). Expected equity risk premium: survey approach in the case of a small emerging market. Research Journal of Finance and Accounting, 7(2), 7-17.
  • Oikonomikou, L. E. (2015). Forecasting the market risk premium with artificial neural networks. (November 2, 2015). Available at SSRN: https://ssrn.com/abstract=2743374.
  • Rizqiyana, A., & Arfianto, E. D. (2019). Pengaruh Ambiguity, Market Risk Premium, Market to Book, Size, dan Momentum terhadap Return Saham pada Perusahaan yang Terdaftar dalam Indeks LQ45 Periode 2017-2018. Diponegoro Journal of Management, 8(4), 70-79
  • Salvi, A., Teti, E., & Giakoumelou, A. (2019). The Relationship between LBOs, IPOs and Market Risk Premium. An Empirical Analysis of the European Market. International Journal of Business and Management, ISSN 1833-3850, 14(7), 160-170.
  • Shalaei, S. K., & Hashemi, S. A. (2017). Studying the impact of accruals quality and market risk premium on stock return excess using FamaFrench three factor model. Journal of Politics and Law, 10, 15-56.
  • Soultanaeva, A., & Strömqvist, M. (2009). The Swedish money market risk premium-experiences from the crisis. Economic Review, 3. Available at SSRN: https://ssrn.com/abstract=163248.
  • Sum, V. (2012). Impulse response functions and causality test of financial stress and stock market risk premiums. International Journal of Financial Research, 4(1), 1-4. Available at SSRN: http://ssrn.com/abstract=2101572.
  • Xiao, Y., Colwell, D. B., & Bhar, R. (2015). Risk premium in electricity prices: evidence from the PJM market. Journal of Futures Markets, 35(8), 776-793.
  • Yoshinaga, Y. (2017, June). Cyclical Trend of Aggregate Earnings and Market Risk Premium. In International Accounting Conference-2017.
  • Yoshinaga, Y. (2018). Cyclicality in Aggregate Earnings and the Market Risk Premium. Available at SSRN: https://ssrn.com/abstract=2977997.

SECTORAL MARKET RISK PREMIUMS IN TURKEY

Year 2022, Volume: 15 Issue: 1, 131 - 133, 30.07.2022
https://doi.org/10.17261/Pressacademia.2022.1594

Abstract

Purpose- This empirical study aims to measure the sectoral market risk premiums in the Turkish stock market for the period of 2016 and
2021 and also estimate the sectoral market risk premiums for the years 2022, 2023 and 2024. Capital Asset Pricing Model (CAPM) is the most
widely used and popular method in the analysis of investment projects, stock valuation, firm valuation, mergers and acquisitions, initial public
offerings, and secondary public offerings. The market risk premium in CAPM is defined as the the difference in between expected market
returns and interest rates. The determination of market risk premium is one of the most important inputs in the application of the CAPM.
This study intends to calculate the market risk premiums and volatilities for the sectors of Borsa Istanbul for the periods of pre-Covid (2016-
2017-2018) and in the Covid-19 era (2019-2020-2021).
Methodology- The monthly data from the Reuters Database are collected for the BIST100 and 17 different sectoral indexes and short-term
interest rates between the years 2016 and 2021. A total of 1296 observations are obtained. Based upon the historical observations, the
market risk premiums are defined as the difference between the market index returns (BIST100 and 17 sectoral indexes) and the average
short-term interest rates on monthly basis. Then, using the ARIMA forecasting method, the market risk premiums are estimated for the years
2022, 2023, and 2024. A total of 576 data points are forecasted.
Findings- The average risk premium on the BIST100 index is about -2.44% for the pre-Covid era and 14.01% for in-Covid era. The market risk
premiums sharply increased from the pre-Covid period to the Covid period. The average volatility on the BIST100 index is about 0.23% for
the pre-Covid era while 0.34% in the Covid era. The volatility of the market returns also incresed significantly. Moreover, the Cusum Square
Test results point a structural break in the Covid-era. The ARIMA estimates of market risk premiums are 1.87% for 2022, 0.43% for 2023 and
0.42% for 2024. THe ARIMA estimates of volatilities are 0.70% for 2022, 0.72% for 2023 and 0.71% for 2024.
Conclusion- The empirical evidence strongly support a structural change in the Covid era with higher market risk premiums and volatilities.
The forecasted market risk premiums for the next three years show a diminishing trend while the forecasted volatilities show high and
persistent level.

References

  • Adjei, F. (2020). Effect of economic policy uncertainty on market risk and market risk premium. Journal of Finance and Economics, 8(2), 57- 60.
  • Ahn, S., & Shrestha, K. (2009). Estimation of market risk premium for Japan. Journal Name: Enterprise Risk Management, 1(1), 33-43.
  • Arismendi-Zambrano, J., & Azevedo, R. (2020). Implicit entropic market risk-premium from interest rate derivatives. Available at SSRN: https://ssrn.com/abstract=3654217.
  • Baghdadabad, M. R. T. (2017). Retraction note to: traditional beta, average drawdown beta and market risk premium. Journal of Asset Management, 18(2), 155-155.
  • Bali, T. G., Cakici, N., & Chabi-Yo, F. (2015). A new approach to measuring riskiness in the equity market: Implications for the risk premium. Journal of Banking & Finance, 57, 101-117.
  • Bhar, R., & Chiarella, C. (2007). A Model for the ex-ante UK stock market risk premium. Journal of Applied Quantitative Methods, 5(4), 599- 606.
  • Blasi, P., Cohen, A., & Simon, A. (2015). The determinants of historical property market risk premium in the London office market (No. eres2015_207). European Real Estate Society (ERES).
  • Bonga-Bonga, L. (2010). The assessment of market risk premium in South Africa. Journal of Applied Business Research (JABR), 26(6), 85-94.
  • Caporale, G. M., Gil-Alana, L. A., & Martin-Valmayor, M. (2021). Persistence in the market risk premium: evidence across countries. Journal of Economics and Finance, 45(3), 413-427.
  • Chalamandaris, G., & Rompolis, L. (2019). Recovering the market risk premium from stock and option prices. Available at SSRN: https://ssrn.com/abstract=2745879.
  • Chalamandaris, G., & Rompolis, L. S. (2021). Recovering the market risk premium from higher‐order moment risks. European Financial Management, 27(1), 147-186.
  • Chun, D., & Cho, H. (2019). Short interest and market risk premium: the case of the Korean market. Korean Journal of Financial Studies, 48(5), 541-566.
  • Du, D., & Hu, O. (2015). The world market risk premium and US macroeconomic announcements. Journal of International Money and Finance, 58, 75-97.
  • Fernández, P., Aguirreamalloa, J., & Acín, I. F. (2015). Required market risk premium among countries in 2012. The Journal of Finance and Data Science, 1(1), 42-54.
  • Fernandez, P., Aguirreamalloa, J., & Avendano, L. C. (2011). Market risk premium used in 56 countries in 2011: a survey with 6,014 answers. Available at SSRN 1822182: http://ssrn. com/abstract=1822182.
  • Fernández, P., Pershin, V., & Fernández Acín, I. (2017). Discount rate (risk-free rate and market risk premium) used for 41 countries in 2017: A survey. Available at SSRN: https://ssrn.com/abstract=2954142
  • Ferreira, T. S. V., Xavier, G. C., & Martins, O. S. (2018). Political uncertainty and risk premium in the Brazilian stock market. Journal of Financial Innovation, early view, 62. doi: https://doi. org/10.15194/jofi_201
  • Fleckenstein, M., & Longstaff, F. A. (2020). The Market Risk Premium for Unsecured Consumer Credit Risk (No. w28029). National Bureau of Economic Research. https://www.nber.org/papers/ w28029.
  • Graham, J. R., & Harvey, C. R. (2015). The Equity Risk Premium in 2015. Available at SSRN: https://ssrn.com/abstract=2611793. In Proceedings of Asia Conference on Business and Economic Studies (ACBES) by University of Economics Ho Chi Minh City on 8th–9th Sep 2018 at Ho Chi Minh City, Vietnam. UEH Publishing House, 62-71.
  • Harris, R. S., & Marston, F. C. (2013). Changes in the Market Risk Premium and the Cost of Capital: Implications for Practice. Journal of Applied Finance (Formerly Financial Practice and Education), 23(1). Available at SSRN: https://ssrn.com/abstract=2686739.
  • Johnson, R., & Soenen, L. (2009). Equity market risk premium and global integration. Journal of Centrum Cathedra, 2(1), 12-23. Available at SSRN: https://ssrn.com/abstract=1805161.
  • Kopchak, S. J. (2016). The regime-switching risk premium in the gold futures market. Journal of Economics and Finance, 40(3). 472-491.
  • Lally, M., & Marsden, A. (2004). Estimating the market risk premium in New Zealand through the Siegel methodology. Accounting Research Journal, 17(2), 93-101.
  • Lie, E., Meng, B., Qian, Y., & Zhou, G. (2017). Corporate activities and the market risk premium. Available at SSRN: https://ssrn.com/abstract=2911120
  • Naumoski, A., Arsov, S., Gaber, S., & Gaber-Naumoska, V. (2016). Expected equity risk premium: survey approach in the case of a small emerging market. Research Journal of Finance and Accounting, 7(2), 7-17.
  • Oikonomikou, L. E. (2015). Forecasting the market risk premium with artificial neural networks. (November 2, 2015). Available at SSRN: https://ssrn.com/abstract=2743374.
  • Rizqiyana, A., & Arfianto, E. D. (2019). Pengaruh Ambiguity, Market Risk Premium, Market to Book, Size, dan Momentum terhadap Return Saham pada Perusahaan yang Terdaftar dalam Indeks LQ45 Periode 2017-2018. Diponegoro Journal of Management, 8(4), 70-79
  • Salvi, A., Teti, E., & Giakoumelou, A. (2019). The Relationship between LBOs, IPOs and Market Risk Premium. An Empirical Analysis of the European Market. International Journal of Business and Management, ISSN 1833-3850, 14(7), 160-170.
  • Shalaei, S. K., & Hashemi, S. A. (2017). Studying the impact of accruals quality and market risk premium on stock return excess using FamaFrench three factor model. Journal of Politics and Law, 10, 15-56.
  • Soultanaeva, A., & Strömqvist, M. (2009). The Swedish money market risk premium-experiences from the crisis. Economic Review, 3. Available at SSRN: https://ssrn.com/abstract=163248.
  • Sum, V. (2012). Impulse response functions and causality test of financial stress and stock market risk premiums. International Journal of Financial Research, 4(1), 1-4. Available at SSRN: http://ssrn.com/abstract=2101572.
  • Xiao, Y., Colwell, D. B., & Bhar, R. (2015). Risk premium in electricity prices: evidence from the PJM market. Journal of Futures Markets, 35(8), 776-793.
  • Yoshinaga, Y. (2017, June). Cyclical Trend of Aggregate Earnings and Market Risk Premium. In International Accounting Conference-2017.
  • Yoshinaga, Y. (2018). Cyclicality in Aggregate Earnings and the Market Risk Premium. Available at SSRN: https://ssrn.com/abstract=2977997.
There are 34 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Suat Teker This is me 0000-0002-7981-3121

Dilek Teker This is me 0000-0002-3893-4015

Esin Demırel 0000-0003-4257-6780

Publication Date July 30, 2022
Published in Issue Year 2022 Volume: 15 Issue: 1

Cite

APA Teker, S., Teker, D., & Demırel, E. (2022). SECTORAL MARKET RISK PREMIUMS IN TURKEY. PressAcademia Procedia, 15(1), 131-133. https://doi.org/10.17261/Pressacademia.2022.1594
AMA Teker S, Teker D, Demırel E. SECTORAL MARKET RISK PREMIUMS IN TURKEY. PAP. July 2022;15(1):131-133. doi:10.17261/Pressacademia.2022.1594
Chicago Teker, Suat, Dilek Teker, and Esin Demırel. “SECTORAL MARKET RISK PREMIUMS IN TURKEY”. PressAcademia Procedia 15, no. 1 (July 2022): 131-33. https://doi.org/10.17261/Pressacademia.2022.1594.
EndNote Teker S, Teker D, Demırel E (July 1, 2022) SECTORAL MARKET RISK PREMIUMS IN TURKEY. PressAcademia Procedia 15 1 131–133.
IEEE S. Teker, D. Teker, and E. Demırel, “SECTORAL MARKET RISK PREMIUMS IN TURKEY”, PAP, vol. 15, no. 1, pp. 131–133, 2022, doi: 10.17261/Pressacademia.2022.1594.
ISNAD Teker, Suat et al. “SECTORAL MARKET RISK PREMIUMS IN TURKEY”. PressAcademia Procedia 15/1 (July 2022), 131-133. https://doi.org/10.17261/Pressacademia.2022.1594.
JAMA Teker S, Teker D, Demırel E. SECTORAL MARKET RISK PREMIUMS IN TURKEY. PAP. 2022;15:131–133.
MLA Teker, Suat et al. “SECTORAL MARKET RISK PREMIUMS IN TURKEY”. PressAcademia Procedia, vol. 15, no. 1, 2022, pp. 131-3, doi:10.17261/Pressacademia.2022.1594.
Vancouver Teker S, Teker D, Demırel E. SECTORAL MARKET RISK PREMIUMS IN TURKEY. PAP. 2022;15(1):131-3.

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