Faculty Scholarship 1994 - Present

The 2000-2001 Turkish Currency Crisis and Financial Institutions Stock Returns

This paper examines the relationship between financial crises and bank stocks return by investigating the effects of the 2000-2001 financial crises in Turkey on Turkish financial institutions (FI). This crises in Turkey has influenced many FI adversely. A financial crisis in a country or region is generally expected to affect FI since they heavily borrow in foreign currencies and lend in domestic currency. This research will highlight the adverse effects of this crisis on Turkish FI. We also use a jump-diffusion model rather than a pure diffusion model to describe daily stock returns because the public release of unexpected information is generally associated with discrete jumps in prices. Traditional event study models pool both announcement effects and trading effects and may lead to inefficient estimators. The jump-diffusion model can separate the impact of informed trading from unanticipated public announcements. We expect that the results may shed some lights on the issue of market efficiency with respect to events such as a financial crisis, taking place in Turkey.