The Behaviour of Asset Return and Volatility Spillovers in Turkey: A Tale of Two Crises



Bajo-Rubio O, Berke B & McMillan D (2017) The Behaviour of Asset Return and Volatility Spillovers in Turkey: A Tale of Two Crises. Research in International Business and Finance, 41, pp. 577-589.

This paper examines return and volatility spillovers between the Turkish stock market with international stock, exchange rate and commodity markets. Our aim is not only to examine spillover behaviour with a large emerging market but also to examine cross—asset spillovers and how they vary across two periods of financial market crisis; the dotcom crash and the liquidity-induced financial crisis. This is to be compared with existing work that typically focuses on industrialised countries or single asset markets only. Using the spillover index methodology we uncover an interesting distinction between these two periods of markets stress. Over the dotcom period spillovers are largely between the same asset class, notably two exchange rate series and two international stock markets series. However, in the period including the financial crisis, spillovers both increase and cross asset types and suggest a much greater degree of market interdependence. Understanding this changing nature in spillovers is key for investors, regulators and academics involved in theoretical model development.

Spillovers; Exchange Rates; Stock Returns; Volatility; Commodity Markets; Turkey

Research in International Business and Finance: Volume 41

Publication date31/10/2017
Publication date online12/04/2017
Date accepted by journal03/04/2017

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Professor David McMillan
Professor David McMillan

Professor in Finance, Accounting & Finance