{"title":"Term premium in Turkish lira interest rates: The role of foreign investors’ share","authors":"Halil İbrahim Aydın , Özgür Özel","doi":"10.1016/j.bir.2024.01.005","DOIUrl":null,"url":null,"abstract":"<div><p>In this paper we decompose Turkish Lira interest rates into expected short rate and term premium components, using two well-established methods. Then we focus on the impact of the share of foreign investors on bond yields by instrumenting that share with VIX and Merry Lynch option volatility estimate (Move) indices while controlling for other macroeconomic determinants of term premium. We find that a one-percentage-point increase in the foreign investors’ share in the bond market reduces the 5-year term premium by 55 basis points, which could be attributed to the impact of yield-seeking foreign investors in emerging markets.</p></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"24 2","pages":"Pages 314-323"},"PeriodicalIF":6.3000,"publicationDate":"2024-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S221484502400005X/pdfft?md5=4cdd36ecf3ff07ef72d74709af87164a&pid=1-s2.0-S221484502400005X-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Borsa Istanbul Review","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S221484502400005X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
In this paper we decompose Turkish Lira interest rates into expected short rate and term premium components, using two well-established methods. Then we focus on the impact of the share of foreign investors on bond yields by instrumenting that share with VIX and Merry Lynch option volatility estimate (Move) indices while controlling for other macroeconomic determinants of term premium. We find that a one-percentage-point increase in the foreign investors’ share in the bond market reduces the 5-year term premium by 55 basis points, which could be attributed to the impact of yield-seeking foreign investors in emerging markets.
期刊介绍：
Peer Review under the responsibility of Borsa İstanbul Anonim Sirketi. Borsa İstanbul Review provides a scholarly platform for empirical financial studies including but not limited to financial markets and institutions, financial economics, investor behavior, financial centers and market structures, corporate finance, recent economic and financial trends. Micro and macro data applications and comparative studies are welcome. Country coverage includes advanced, emerging and developing economies. In particular, we would like to publish empirical papers with significant policy implications and encourage submissions in the following areas: Research Topics: • Investments and Portfolio Management • Behavioral Finance • Financial Markets and Institutions • Market Microstructure • Islamic Finance • Financial Risk Management • Valuation • Capital Markets Governance • Financial Regulations
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