THE EFFECT OF EXCHANGE RATE AND CDS PREMIUM ON MSCI ETF INVESTMENTS: A NARDL MODEL FOR TURKEY

Exchange Traded Fund (ETF) is an investment fund traded on stock exchanges. ETF is one of the important financial instruments and attracts the attention of international investors due to its many advantages. The most important advantages of these financial instruments are that they are based on the risk distribution and low cost. Investors who want to use these positive features and earn money also have a good diversification purpose by investing in the country's ETFs. Investing in an country’s ETFs also requires considering the risk of that country. At this point, credit default swap (CDS) which is one of the important risk indicators of countries in recent years plays an important role. In this study, the impact of exchange rate and credit default swaps on prices of the Turkish ETF which traded on American markets is examined by Nonlinear Cointegrating Autoregressive Distributed Lag Model for 2008:03-2018:09 periods. The results of the study confirm the existence of an asymmetrical relationship between the variables in the short and long term and cointegration relationship. According to the long-term results of the NARDL model, the coefficient of positive and negative components of exchange rate is significant and negative. In this case, it is determined that the increases and decreases in the USD / TL exchange rate in the long term has a negative impact on ETF prices and the same results are valid for the short term. Moreover, the negative and significant findings between CDS premium and ETF prices indicate that investment in ETFs decrease when country risk increase.

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