INTERACTION AND VOLATILITY SPILLOVER AMONG SELECTED FINANCIAL ASSETS IN TÜRKİYE

Abstract

This study aims to examine the dynamic relationships and volatility propagation mechanisms among selected financial assets in Türkiye. By analyzing the interactions between the Borsa Istanbul 100 Index (XU100), interest rates, gold prices and the USD/TRY exchange rate, the study assesses how shocks between these assets propagate. Using a time-varying parameter vector autoregression (TVP-VAR) model, the analysis analyzes monthly data for the period 01:2002-10:2024. The findings of the study shed light on the complex and interconnected nature of financial markets. While the XU100 is most affected by its own past shocks, assets such as gold and exchange rates are more exposed to external shocks. Aggregate volatility dispersion analysis reveals that Borsa Istanbul and gold act as net shock emitters, while interest rates and exchange rates act as net shock receivers. These results have important implications for both policymakers and investors. Investors should optimize their portfolio management strategies in line with these dynamics, while policymakers should take measures to minimize economic uncertainties and the effects of external shocks. The study contributes to a more effective and sustainable analysis of Turkish financial markets.