Causal relationship between greed and fear index and non-performing loans: an empirical study on the Turkish banking sector

Abstract

This study aims to investigate the causality relationship between the greed and fear index and non-performing loans in the Turkish banking sector. Time series analyses are used in this study. For this purpose, Zivot and Andrews unit root test was used to determine the stationarity of the series. Then, Granger causality test was applied to determine whether there is a causality relationship between the series and if there is a causality relationship, the direction of the causality relationship. According to the results of the study, there is a unidirectional Granger causality relationship between the non-performing loan ratios of the Turkish banking sector and the greed and fear index. In other words, it is concluded that an increase in the Greed and Fear Index increases the non-performing loan(NPL) ratios of the banking sector.