İ. Orkun ORAL,

Cihan YILMAZ

In recent years, the number of studies carried out to analyze the effects of country risk composed of the sum of economic, political and financial risk on the stock exchange market has increased in the Economic and Finance literature. The improvement and liberalization of financial markets and boost in interaction level among submarkets have quietly sensitized stock prices, performances of stock market, stock exchange transaction volume and stock market index against economic and political developments. In this conjuncture, the risk factor is of capital significance in terms of markets and investors. The purpose of study is to investigate whether there is any effect of political risk in systematic risk group and of financial risk in non-systematic risk group on Istanbul Stock Exchange Industrial Index including the stock certificates of industrial companies within the Istanbul Stock Exchange. In other words, the effect of a macro variation in micro level is investigated. Within this scope, the political and financial risk degrees of Turkey calculated by the International Country Risk Guide (ICRG) and the closure data of Istanbul Stock Exchange Industrial Index covering the period between 1992 and 2014 were analyzed with the bound test (ARDL). In the result of analysis, the existence of long and short term relationship between Istanbul Stock Exchange Industrial Index and political and financial risk was founded.

Keywords: Financial Risk, Political Risk, Istanbul Stock Exchange Industrial Index