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Öğe Bank default indicators with volatility clustering(Springer Science and Business Media Deutschland GmbH, 2021) Kenc, T.; Çevik, Emrah İsmail; Dibooğlu, SelWe estimate default measures for US banks using a model capable of handling volatility clustering like those observed during the Global Financial Crisis (GFC). In order to account for the time variation in volatility, we adapted a GARCH option pricing model which extends the seminal structural approach of default by Merton (J Finance 29(2):449, 1974) and calculated “distance to default” indicators that respond to heightened market developments. With its richer volatility dynamics, our results better reflect higher expected default probabilities precipitated by the GFC. The diagnostics show that the model generally outperforms standard models of default and offers relatively good indicators in assessing bank failures. © 2020, Springer-Verlag GmbH Germany, part of Springer Nature.Öğe Connectedness and risk spillovers between crude oil and clean energy stock markets(Sage Publications Ltd, 2023) Çevik, Emre; Çevik, Emrah İsmail; Dibooğlu, Sel; Cergibozan, Raif; Buğan, Mehmet Fatih; Destek, Mehmet AkifThis research investigates the relationship between clean energy stock and oil market returns utilizing Granger predictability in distribution and quantile impulse response analysis. We find that clean energy stock returns Granger predict oil price returns during normal times based on the distribution's center, but not vice versa. During bullish market episodes, there is bidirectional Granger predictability between the returns of clean energy stocks and oil market returns. Nonetheless, we find that clean energy stock returns Granger predict oil returns in bearish markets without any evidence of the contrary. This indicates that oil returns cannot be used to hedge the downside risk associated with renewable energy company purchases. Quantile impulse responses for the relationship between clean energy stocks and the crude oil market reveal bidirectional and significant responses, where a negative shock during an extremely down market reveals a negative response in the other market and a positive shock during an extremely up market reveals a significant positive response. This shows that neither market can be utilized to offset risks in the other market.Öğe Credit default risk in Islamic and conventional banks: Evidence from a GARCH option pricing model(Elsevier, 2022) Dibooğlu, Sel; Çevik, Emrah İsmail; Al Tamimi, Hussein A. HassanAn important question in banking is whether restrictions placed on Islamic banks make them more resilient to financial market turmoil and less prone to failure than conventional banks. We evaluate this claim by estimating credit default risk measures for a sample of conventional and Islamic banks using a GARCH option pricing model. Using a daily data set that is better suited for the time variation in volatility, we calculate distance to default measures to evaluate credit risk of Conventional Banks (CBs) and Islamic banks (IBs). We find higher default risk measures for IBs than CBs in general except during the Global Financial Crisis. This result holds true after controlling for bank and country specific variables in that IBs seem to have significantly lower default risk during the Global Financial Crisis and higher default risk thereafter. Consequently, while restrictions on risk taking is advantageous in financial turmoil episodes, the same restrictions expose IBs to risks in normal times. Finally, the credit risk of CBs and IBs is negatively affected by the oil crisis in 2014-2015 and the Covid-19 global pandemic. While there is no significant difference between the effects of the oil crisis on IBs versus CBs, the recent Covid-19 pandemic seems to have worsened the credit risk of IBs compared to CBs. (c) 2022 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.Öğe Emerging market portfolios and Islamic financial markets: Diversification benefits and safe havens(Elsevier, 2022) Buğan, Mehmet Fatih; Çevik, Emrah İsmail; Dibooğlu, SelWe examine the relationship between Islamic and conventional stock market returns to see if Islamic financial markets provide portfolio diversification benefits and safe havens during turbulent times. Using daily data from January 1996 through September 2020 we consider conventional emerging stock market returns and some Islamic stock market returns and examine their interactions using causality-in-variance, dynamic conditional correlations, optimal hedge ratios, and causality-in-risk tests. Causality-in-variance test results show causality between Islamic stock returns and all emerging stock returns which indicates Islamic markets provide limited safe havens. Results from both time-varying conditional correlations and the hedge ratios show that there are positive and significant correlations between emerging stock markets and Dow Jones Islamic Market Index, which implies limited portfolio diversification benefits afforded by Islamic stock markets. Copyright (C) 2021, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B.V.Öğe Financial conditions and monetary policy in the US(Elsevier, 2020) Dibooğlu, Sel; Erdoğan, Seyfettin; Yıldırım, Durmuş Çağrı; Çevik, Emrah İsmailWe examine the FED's monetary policy rule with financial stability considerations and under asymmetry. We use the National Financial Conditions Index constructed by the Chicago FED in order to test whether financial stability concerns enter monetary policy formulations in the US. We model nonlinearity in monetary policy by a Markov regime-switching model. The results show that the monetary policy implemented by the FED can be characterized as a two-state Markov process and financial instability significantly increases the likelihood of regime-switching from a tranquil to a distressed regime. Moreover, the likelihood of a switch in the FED's monetary policy regime between tranquil and distressed seems to increase when a certain threshold level of the financial conditions index is reached. Finally, our results seem to be robust to alternative specifications of the reaction function and different forms of non-linearity.Öğe Financial stress transmission between the U.S. and the Euro Area(Elsevier B.V., 2022) Altınkeski, B.K.; Çevik, Emrah İsmail; Dibooğlu, Sel; Kutan, A.M.This paper examines financial stress transmission between the U.S. and the Euro Area. To better understand the linkages between financial stress in the two regions, we construct a financial stress index for the U.S. similar to the Composite Indicators of Systemic Stress (CISS) that has been developed for the Euro Area with a focus on systemic risk. Using weekly data from 2000 to 2021 and Granger predictability in distribution test, we analyze stress transmission in “normal” times as well as under unusually high and low stress episodes. While we document unilateral transmission from the U.S. to the Euro Area under normal conditions based on the center of the distribution, tail dependence tests and impulse response analysis show significant bilateral transmission, particularly in unusually high financial stress episodes. This holds true for aggregate indices as well as the subindicators of financial stress in various financial markets. As such, there must be global efforts to contain financial crises and ensure a strong and resilient financial system. © 2022 Elsevier B.V.Öğe Global Liquidity and Financial Stress: Evidence from Major Emerging Economies(Routledge Journals, Taylor & Francis Ltd, 2016) Çevik, Emrah İsmail; Kırcı Çevik, Nüket; Dibooğlu, SelWe examine the relationship between financial stress and global liquidity for the so-called fragile five emerging economies (Brazil, India, Indonesia, South Africa, and Turkey). By using an extensive set of variables that take into account the structural characteristics of these economies, we construct a financial stress index. We then use a Markov regime switching model to identify the high financial stress episodes. We examine periods of heightened financial stress and its relationship to high incidence of domestic and global disturbances. Finally, we construct a global financial liquidity index and assess the relationship between financial stress and global liquidity. Using a bivariate Markov regime switching VAR model, we find a regime-dependent relation between global liquidity and financial stress. Moreover, global liquidity shocks seem to strain these emerging economies in such a way that global illiquidity heightens financial stress.Öğe Gold, silver, and the US dollar as harbingers of financial calm and distress(Elsevier Science Inc, 2022) Dibooğlu, Sel; Çevik, Emrah İsmail; Gillman, MaxIn this paper, we investigate the relationship between gold, silver, and the US dollar returns and financial stress to shed light on the circumstances where these assets serve as attractive investment vehicles and whether the assets signal financial conditions ahead. Using weekly data from 1994 to 2020 and predict-ability-in-mean, predictability-in-variance, and predictability-in-distribution, we examine the relationship between returns on gold, silver, and the US dollar and the St Louis Financial Stress Index (STLFSI). While we find no Granger predictability in the mean between gold returns and the aggregate STLFSI, there is some evidence of Granger predictability between silver and US dollar returns and financial stress. However, test results show significant bidirectional Granger predictability in variance between STLFSI and gold, silver, and US dollar returns. Predictability-in-distribution tests generally show significant bidirectional relationships between financial stress and gold, silver, and US dollar returns at the left and right tail of the distribution. We confirm the safe-haven properties of gold, silver, and the US dollar and find novel evidence that very low returns on these assets signal financial calm, and unusually high returns signal high financial stress ahead. In this sense, extreme gold, silver, and US dollar returns are harbingers of calm times or financial distress to come, acting as early financial market news providing risk guideposts for safety.(c) 2022 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.Öğe Identifying systemically important financial institutions in Turkey(Elsevier, 2021) Çalışkan, Hande; Çevik, Emrah İsmail; Kırcı Çevik, Nuket; Dibooğlu, SelThis paper examines the systemic risk of financial firms in Turkey. Using Component Expected Shortfall, we provide estimates of systemic risk in Turkey using daily data from 2005 to 2018 and a comprehensive data set encompassing 54 financial firms. Empirical results show that the preponderance of systemic risk in the sample in Turkey is due to large commercial banks. Top ten systemically important financial institutions dominate systemic risk measures in Turkey and account for more than 90 % of total risk over the sample. Consequently, the risk in the Turkish financial system is concentrated in specific financial institutions and makes close monitoring of the top firms essential. Historical incidence of systemic risk in the sample shows elevated levels of systemic risk correspond to well-known external events. Finally, a bivariate VAR model shows that systemic risk is correlated with measures of global financial risks and has significant negative effects on the real economy particularly on industrial production. This is important from a financial stability point of view in that close monitoring of the systemic risk is important in maintaining a healthy financial system and a well- functioning market economy.Öğe Investor sentiments and stock markets during the COVID-19 pandemic(Springer, 2022) Çevik, Emre; Altınkeski, Buket Kırcı; Çevik, Emrah İsmail; Dibooğlu, SelThis study examines the relationship between positive and negative investor sentiments and stock market returns and volatility in Group of 20 countries using various methods, including panel regression with fixed effects, panel quantile regressions, a panel vector autoregression (PVAR) model, and country-specific regressions. We proxy for negative and positive investor sentiments using the Google Search Volume Index for terms related to the coronavirus disease (COVID-19) and COVID-19 vaccine, respectively. Using weekly data from March 2020 to May 2021, we document significant relationships between positive and negative investor sentiments and stock market returns and volatility. Specifically, an increase in positive investor sentiment leads to an increase in stock returns while negative investor sentiment decreases stock returns at lower quantiles. The effect of investor sentiment on volatility is consistent across the distribution: negative sentiment increases volatility, whereas positive sentiment reduces volatility. These results are robust as they are corroborated by Granger causality tests and a PVAR model. The findings may have portfolio implications as they indicate that proxies for positive and negative investor sentiments seem to be good predictors of stock returns and volatility during the pandemic.Öğe Oil prices, stock market returns and volatility spillovers: Evidence from Turkey(Elsevier B.V., 2020) Çevik, Nüket Kırcı; Çevik, Emrah İsmail; Dibooğlu, SelThis paper examines the relationship between crude oil prices and stock market returns in Turkey taking into account volatility spillovers that are exemplified by second moment effects. Using weekly data from 1990 to 2017 and time varying causality-in-mean and causality-in-variance tests and taking into account structural breaks, we model each series as an EGARCH process in order to capture any leverage effects in the volatility of returns. Empirical results suggest crude oil prices as measured by Brent benchmark have significant effects on stock market returns in Turkey. While we fail to document significant spillover effects stemming from oil prices in the entire sample, there are significant spillover effects from crude oil price changes to stock market returns in 1993 and 2008–09. These results suggest that government policies must take into account risk spillover effects between markets and that investors are better off monitoring crude oil markets in portfolio allocation decisions. © 2020 The Society for Policy ModelingÖğe Oil prices, stock market returns, and volatility spillovers: evidence from Saudi Arabia(Springer Heidelberg, 2021) Çevik, Emrah İsmail; Dibooğlu, Sel; Awad Abdallah, Atif; Al-Eisa, Eisa AbdulrahmanThis work reinvestigates the interrelationship between crude oil prices and stock market returns in Saudi Arabia by taking into account volatility spillovers that are exemplified by second-moment effects. Using weekly data from 2001 to 2018 and time-varying causality-in-mean and causality-in-variance tests and taking into account structural breaks, we model each series as an APARCH process to capture any leverage effects in the volatility of returns. Empirical results suggest the existence of a bidirectional causality relationship between stock and oil performance series. While we fail to document significant spillover effects stemming from the stock market to the oil market, we detected substantial spillover effects running from crude oil price changes to stock market returns. We also find evidence in favor of the presence of risk spillovers between crude oil price and stock market. In this context, unexpected loses in the oil market can be predicted by using sudden past declines in the Saudi Arabian stock market and a substantial increase in the oil price seems to have significant predictive power for a rise in the stock market in the future. These results suggest that government policies must take into account risk spillover effects between markets and that investors are better off monitoring crude oil markets in portfolio allocation decisions.Öğe Renewable and non-renewable energy consumption and economic growth in the US: A Markov-Switching VAR analysis(SAGE Publications Inc., 2021) Çevik, Emrah İsmail; Yıldırım, Durmuş Çağrı; Dibooğlu, SelWe examine the relationship between renewable and non-renewable energy consumption and economic growth in the United States. While the regime-dependent Granger causality test results for the non-renewable energy consumption and economic growth suggest bi-directional causality in both regimes, we cannot validate any causality between renewable energy consumption and economic growth. The US meets its energy demand from non-renewable sources; as such, renewable energy consumption does not seem to affect economic growth. Given the efficiency and productivity of renewable energy investments, we conclude that it is worthwhile to consider renewable energy inputs to replace fossil fuels given potential benefits in terms of global warming and climate change concerns. In this regard, increasing the R&D investments in the renewable energy sectors, increases in productivity and profitability of renewable energy investments are likely to accrue benefits in the long run. © The Author(s) 2020.Öğe The connectedness and risk spillovers between bitcoin spot and futures markets: evidence from intraday data(Springer, 2022) Çevik, Emrah İsmail; Günay, Samet; Buğan, Mehmet Fatih; Dibooğlu, SelThis paper examines the dynamic relation between Bitcoin spot and futures markets during the Covid-19 pandemic. Using hourly data from 2020 combined with quantile impulse response analysis and predictability in the distribution test, we attempt to ascertain whether spot or futures markets lead in the price discovery process under a variety of market conditions. Granger predictability based on the left tail, the right tail, and the center of the distribution show bidirectional predictability between spot and futures markets suggesting significant feedback effects following normal and extreme gains/losses where neither market dominates in price discovery. Using a CAViaR model and the associated impulse response functions with estimates for dynamic tail dependence, we document spillovers between quantiles of spot and futures returns. Estimates of impulse response functions at various risk levels show the futures market has an edge in influencing the spot market and figures more prominently in the price discovery process.Öğe The effect of North Korean threats on financial markets in South Korea and Japan(Elsevier Science Bv, 2016) Dibooğlu, Sel; Çevik, Emrah İsmailThis paper examines the effects of North Korean threats, as measured by the proprietary North Korean Threat Index (NKTI), on financial markets in South Korea and Japan. We examine the effects of the threats on stock markets, foreign exchange markets, and overnight interest rates. We consider causality in mean and variance tests to determine any link between the NKTI and financial variables. The causality-in-mean test results indicate the presence of a causal link running from North Korean threats to stock returns and exchange rate returns in both countries, but no significant link to the overnight interest rate in either country. The causality-in-variance test results indicate no significant impact emanating from North Korean threats. Integrating the North Korean economy into the global economy stands to eliminate these threats and thus to contribute to regional financial stability. (C) 2016 Elsevier Inc. All rights reserved.Öğe The impact of expected and unexpected events on Bitcoin price development: Introduction of futures market and COVID-19(Elsevier Ltd, 2023) Çevik, Emrah İsmail; Günay, Samet; Dibooğlu, Sel; Yıldırım, Durmuş ÇağrıThis study examines the impact of two critical events, the introduction of Bitcoin futures and the COVID-19 pandemic, on Bitcoin's returns and volatility. We find that the inception of Bitcoin futures (positively) impacts its returns in the spot market while no significant interaction occurs for volatilities. The pandemic does not seem to influence Bitcoin's returns or volatility, which is consistent with the notion that Bitcoin is insulated from some global economic developments. Our tests also reveal that Bitcoin spot prices dominate its futures. This information might be useful for investors in capturing trend reversals considering the order of information disseminated. © 2023 Elsevier Inc.Öğe The Relationship Between Price Stability and Financial Stability: Evidence From Major Emerging Economies(Routledge Journals, Taylor & Francis Ltd, 2019) Çevik, Nüket Kırcı; Yurtkur, Asuman Koc; Dibooğlu, SelWe examine the relationship between price stability and financial stability for major emerging economies using a Markov regime-switching model. Empirical results suggest that monetary policy is consistent with the Taylor rule in all countries except for India and all countries followed both low and high inflation targeting monetary policy regimes. Low inflation targeting regime seems to be more persistent and has higher duration than high inflation targeting regimes except for Indonesia and South Africa. All countries seem to have had financial stability concerns when they formulated their monetary policy as the coefficient of the financial stress index is statistically significant at least in one regime. Overall the results suggest that Taylor rule-based monetary policies have been implemented to various degrees in major emerging economies to achieve economic stability, price stability, and financial stability.
