The Relationship Between Market Risk Performance Rankings and Betas of The Istanbul Stock Exchange-Banks


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Acar E.

Euroasia Congress on Scientific Researches And Recent Trends-VII, Baku, Azerbaijan, 6 - 09 December 2020, pp.83-84

  • Publication Type: Conference Paper / Summary Text
  • City: Baku
  • Country: Azerbaijan
  • Page Numbers: pp.83-84

Abstract

One of the bank performance assessment components is the bank’s sensitivity to market

risk. The factors such as interest rate and exchange rate may lead to changes in the value of the

bank stocks and hence, the structure of some financial ratios affects the bank’s sensitivity to

market risk. In the literature, there are miscellaneous financial ratios that may be used to

measure the sensitivity to market risk, and 4 distinct ratios fit for the purpose were selected

within the scope of this study. These ratios are as follows: Fixed Assets/Total Assets, Net

Exchange Position/Equities, Liquid Assets (Foreign Currency)/Liabilities (Foreign Currency),

and Interest Incomes/Total Assets. Among these ratios, the Fixed Assets/Total Assets ratio

only is opposite direction to the sensitivity to market risk, and when a bank has a high number

of fixed assets, it is not affected by market movements, and its sensitivity decreases. All other

ratios are in the same direction with the sensitivity to market risk. A significant correlation is

expected between the bank’s performance value for the sensitivity to market risk and its beta

coefficient which is an indicator of systematic risk of the bank stock.