Volatility Spillover between the Stock Market, Exchange Rates, Interest Rates and CDS Premiums: Evidence from Turkey

Article Information
Journal: Business and Economics Research Journal
Title of Article: Volatility Spillover between the Stock Market, Exchange Rates, Interest Rates and CDS Premiums: Evidence from Turkey
Author(s): Zekai Senol
Volume: 12
Number: 1
Year: 2021
Page: 111-126
ISSN: 2619-9491
DOI Number: 10.20409/berj.2021.313
Abstract
In recent years, the volatility of financial assets has significantly increased. High volatility causes instability in financial markets and increases portfolio risks. Under these conditions, modeling the volatility, determining the volatility relationships, and volatility spillovers are important for market actors. In this study, for the period January 2, 2010 – April 10, 2020, it was investigated the volatility spillover and correlation relationship between the Borsa Istanbul (BIST) 100 Index, the exchange rates ($/₺), interest rates, and credit default swap (CDS) premiums. It was also examined the effects of economic, political, and social factors on the correlation relationship. In the study, it was seen that the bidirectional volatility spillover between the BIST 100 index – exchange rates, interest rates – exchange rates, and CDS premiums – interest rates, on the other hand, unidirectional volatility spillover from CDS premiums to the exchange rates. A positive volatility relationship was determined between CDS premiums – interest rates and CDS premiums – exchange rates while the negative volatility relationship between interest rates – BIST 100 index and CDS premiums – BIST 100 index. It was also determined that political, economic, and social factors affect the relationships of correlation between variables.

Keywords: Stock Markets, Exchange Rates, Interest Rates, CDS Premiums, Volatility Spillover

JEL Classification: C58, E40, G10, G17

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