Analysis of binary panel data by static and dynamic logit models: Stock returns and macroeconomic factors

Abstract

This paper analyses the effect of macroeconomic factors on stock returns using static and dynamic models for binary panel data. Eighty four firms of manufacturing industry, which are traded on the Istanbul Stock Exchange, are covered in the study. The results show that the inflation rate, the interest rate, the exchange rate and the balance of trade deficit have significant effects on stock returns. They also indicate that price fluctuations in the previous period will affect transaction attitudes of investors on stocks in the current period.