**Abstract**

In this chapter we investigate the asymmetric impact of exchange rates on three major stock market indices in Turkey using four different ARDL models between 2003M1 and 2018M12. This chapter also attempts to differentiate the short-run and the long-run relationship between exchange rates and stock market indices namely BIST All shares, BIST National 100 index, and BIST National 30 index. Our motivating question is whether the relationship between exchange rates and three major stock market indices are symmetric or asymmetric in Turkey? To answer this, we first use the linear bivariate and multivariate models assuming the effects are symmetric. We then use the non-linear bivariate and multivariate models to examine whether exchange rate have symmetric or asymmetric effects on selected stock stock market indices in Turkey. The findings show that exchange rates have asymmetric effects on all three major stock market indices both in the short and long run. When we look at the long-run, the currency appreciation has positive and significant impact on selected stock markets but currency depreciation does not have an effect. This finding is in line with the understanding that Turkish sectors heavily depends on the import of raw and intermediate goods. The results also show that the economic activity has positive and significant effects on all stock markets implying that it is the main determinant in the long-run. Moreover, interest rates and volatility index were negative and significant in all markets. Thus, it has important implications for policy makers to provide stable prices and diverse investors.

**Keywords:** asymmetric effects, exchanges rates, stock markets, ARDL models, Turkey
