The real estate industry in Turkey: a time series analysis

What is it about?

The aim of this paper is to explore the impact of the exchange rate, the gold price, and the BIST100 Borsa Istanbul Index on the price of real estate stocks in the Turkish stock market, using monthly data from 2004 to 2016. To this effect, we apply DOLS, FMOLS, ARDL, and Markov Switching tests. Moreover, we also apply the Toda and Yamamoto causality test to explore the causality in the impact of the exchange rate and the gold price on the price of real estate stocks. The major findings of this study are that (i) the combination of the exchange rate, the gold price, and the BIST100 index has a long-term effect on prices of real estate stocks; (ii) prices of real estate stocks are negatively affected by the exchange rate and the gold price; and (iii) changes in the exchange rate, the gold price, and the BIST100 index lead to changes in prices of real estate stocks in the Turkish stock market. To the best of our knowledge, real estate stocks in emerging markets have received little attention from researchers thus far. Our empirical findings may encourage further research into this topic.

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Why is it important?

The effect of exchange rate (USD$/TL) and gold price on the stock price of real estate industry in the Turkish stock market has not been tested in emerging countries. This study fills this gap in the literature, in particular, for the case of Turkey, where housing sector has achieved substantial growth rate due to rapid urbanization after the economic crisis in 2001. Moreover, this study contributes to the literature by using novel comprehensive index namely ‘Immovable Property Index’ which includes all the publicly traded stock prices of real estate companies