Relationships between the indices selected from risk and uncertainty indices and the stock exchanges of developing countries: An econometric application

Various risk and uncertainty indices are used as indicators in estimating the future movements of globalized securities markets. The aim of this study is to determine the relationship between selected risk and uncertainty indices consisting of Economic Policy Uncertainty (EPU), Financial Stress (FSI), Geopolitical Risk (GPR) and Volatility (VIX) and the emerging country stock exchanges consisting of Turkish stock exchange (BIST100), Brazilian stock market (BVSP), South Africa. stock exchange (JTOPI), Russian stock exchange (MOEX), Mexican stock exchange (MXX), Indian stock exchange (NIFTY50) and China stock exchange (SSI). In the study, daily logarithmic data of VIX index for the period 01.01.2003-31.12.2019 and monthly logarithmic data of risk and uncertainty indices for the period 01.01.2003-01.12.2019 were used. In the analysis of the relationships between the variables, ARDL bounds test and QRES were used depending on whether the variables were stationary in level or at first difference. Moreover, in the analysis of the causal relationship between the variables, the Toda-Yamamoto causality test, which allows the analysis of the series which are stationary at different levels, and the Granger causality test for the variables that are stationary at the level were applied. According to the findings, statistically significant relationships between the stock exchanges of selected developing countries and the risk and uncertainty indices in the short and long term in accordance with the economic theory were found. In addition, the results of this study provide important information to stock market investors, policy practitioners and other interested parties. Keywords: VIX index, QRES, ARDL, Toda-Yamamoto Causality Test, BİST100.