Investigating the relationship between selected risk measures and sustainability index

The aim of this study is to investigate the cointegration relationship among selected risk measures that reflect the perception of uncertainty and risk in financial markets. Those risk measures serve as indicators of volatility and the BIST Sustainability Index (XUSRD) serves as measure of sustainability performance of companies traded in Borsa Istanbul. For this purpose, monthly data for 3 different risk measures, VIX (Volatility Index), OVX (Crude Oil Volatility Index) and GVZ (Gold Volatility Index) are used for the 01.12.2014-01.12.2023 period. In the study, volatility indices are accepted as independent variables and XUSRD index as dependent variable. Moreover, inflation rate (TUFE) and indicator interest (FAIZ) are employed as control variables ARDL approach is employed in the analysis as it allows the examination of stationary series at different levels. The test results are compared with the reference values suggested by Pesaran, Shin and Smith (2001) and Narayan (2005) and it is concluded that there is a cointegration relationship among the variables. Toda-Yamamoto causality test that allows the analysis of series with different stationarity levels is used to test causality relationship among variables. Findings reveal statistically significant relationship between the selected risk measures and the BIST sustainability index in the short and long term. In the analysis where the BIST Sustainability Index is the dependent variable and the VIX, OVX, and GVZ volatility indices are the independent variables, with inflation and interest rate variables added as control variables, a long-term cointegration relationship was observed among the variables. In this study, which examines the long-term relationship between the BIST Sustainability Index (XUSRD) and the VIX, OVX, and GVZ indices, it was found that there is no statistically significant long-term relationship between XUSRD and OVX and between XUSRD and GVZ. However, a significant long-term relationship was determined between XUSRD and the VIX index. This finding indicates that the VIX volatility index, also known as the fear index in the market, has a negative impact on the BIST Sustainability Index. According to the results of the Toda-Yamamoto causality test conducted to analyze the causal relationships between the variables, a unidirectional causality relationship was detected from VIX to XUSRD, OVX to XUSRD, and GVZ to XUSRD at the 5% significance level. These results reveal that the BIST Sustainability Index is separately affected by each volatility index and that this relationship is statistically significant.