The Effects of the Volatilities in Global Determinants on the Istanbul Stock Exchange

Nezir Köse () and Emre Ünal ()

Panoeconomicus, vol. 0, issue 0, 1-38

Abstract: This study investigates the impact of the VIX, volatility in the oil price, gold price, exchange rate, interest rate, and traded value on volatility in the Istanbul stock exchange. The structural vector autoregression (SVAR) model and pairwise and multivariate Granger causality tests were utilized for weekly data ranging from January 2002 to November 2020. According to causality tests, the volatility in global determinants were the primary factors that determined the volatility in the stock exchange. The variance decomposition analysis indicated that the VIX was the main contributor to stock exchange volatility, and its influence increased in successive time periods. The impact of the volatility in the gold price had the second highest influence, while the influence of the oil price remained more limited. The volatility in the stock exchange was significantly affected by volatility in the exchange rate, but the significance of its movements decreased over time. In the early stages, the gold price had no effect, but then it started to have a significant and continuous positive impact. The volatility in the oil price was initially positive and significant, but after a few weeks, its influence became insignificant. Interest rate volatility was insignificant, but exchange rate volatility remained positive and significant for a few of weeks. The volatility in traded value initially appeared insignificant, but it eventually became significant, had a positive influence, and had a long-lasting effect on stock exchange volatility. Hence, the VIX is the most important global driver of stock exchange volatility in both long and short terms. JEL: C32, C58, G12

Keywords: Granger causality tests; Istanbul stock exchange; SVAR model (search for similar items in EconPapers)
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