Analysis of the relationships between Borsa Istanbul sector indices and volatility index

Technological developments significantly affect the actors that constitute the financial markets which are essential part of the economy. Developments made the concept of volatility, which is a measure of fluctuations and changes in financial markets, important for the financial actors. The actors in the financial market act with the motive of making the right decisions by taking the volatility estimates as a measure while making the investment decision based on the financial indicators in the investment process. Based on the expectations and uncertainties in the markets, investors want to minimize the risk factors by using financial data notably volatility forecasts and historical data. There are many global, regional and country-based indices calculated for volatility, which are considered as a measure of risk in financial markets. Investors have the opportunity of planning and managing their investments by following changes in these indices. In order to do this, the relations between the volatility indices and the stock market or sector that are thought to be invested in should be determined. In this context, the main purpose of the study is to investigate the asymmetric causality relationships between 6 different volatility indexes and Borsa İstanbul sector index returns. In accordance with this purpose, the data of BIST industrial, financial and services index returns and Euro volatility index, gold volatility index, oil volatility index, Euro Stoxx volatility index, fear index (VIX) and NASDAQ volatility index between 3/18 / 2011- 3/29/2019 were analyzed by Hatemi-J asymmetric causality test. The results of the analysis showed that there are causality relationships between all volatility indices and BIST sector returns in different asymmetric directions.