Cointegration and Causality Relationship between BIST 100 and BIST Gold Indices(BİST 100 ve BİST Altın Endeksleri Arasındaki Eşbütünleşme ve Nedensellik İlişkisi)

Abstract

The aim of this study is to determine the nature of the long term relationship between the BIST Gold Market Index (GOLD) and BIST 100 index (BIST). The daily closing values of both indices are obtained from the Borsa Istanbul’s official web site for the period of August 1 st 2012 to March 17th 2015. Statistical methods of the Augmented Dickey Fuller (ADF) unit root test, EngleGranger cointegration test, error correction model, and finally Granger causality tests are used in the study. It is concluded that BIST and GOLD are cointegrated, which means that a long term equilibrium relationship exists between the two indices. The Granger causality test indicated that there is a unidirectional causality running from BIST towards GOLD for the period under investigation. In terms of short term dynamics, it is determined that the rate of the disequilibrium correction is slow at only about 2% on a daily basis. Any deviation from the long run equilibrium value is eliminated after about 50 days.

Keywords

• cointegration
• error correction model
• BIST 100
• BIST GOLD