Effects of Financial Development and Financial Globalization on Stock Market Prices: The Case of Türkiye

A multitude of factors exert influence on stock prices. In this era of globalized capital markets, characterized by the absence of borders and the interpenetration of economies, development and globalization have emerged as pivotal elements in shaping stock prices and financial returns. Noteworthy is the decision made in 1980 in Turkey, wherein policies aimed at import substitution were relinquished, and efforts toward liberalization and globalization were prioritized. In this context, a crucial undertaking entails the examination of capital market returns within Turkey, particularly in the context of development and globalization. This study utilizes a comprehensive econometric analysis, encompassing the period from 1997 to 2021, in order to examine the relationship between the ISE All Shares Closing Prices, Financial Development Index, and Financial Globalization Index. The study employs the Johansen Cointegration Test, a methodology that assesses the long-term relationship between variables that become stationary at the first difference. The research hypothesis posits that stock prices in Türkiye are influenced by globalization and development. The findings of this study revealed a cointegration relationship between the dependent variable, ISE All Shares Closing Prices, and the independent variables, Financial Globalization and Financial Development Indices. However, a long-term causality was identified from the Financial Development Index and ISE All Shares Closing Prices to the Financial Globalization Index.