This study aims to investigate the interconnectedness across the risk appetite of distinct investor types in Borsa Istanbul. This study also examines the causal impact of global implied volatility indices on the risk appetite of these investor groups.
The authors use a novel time-varying frequency connectedness framework of Chatziantoniou et al. and a new time-varying Granger causality test with a recursive evolving procedure by Shi et al. over June 2008 and July 2022.
The results show a high level of interconnectedness across the risk appetite of different investor types. The sizable spillovers to domestic types of investors either occur from professional or foreign investors, indicating the long-term dominant effect of foreign and more qualified investors on the domestic investors in Borsa Istanbul. The authors provide significant evidence of causality from the global implied volatility to the Borsa Istanbul risk appetite indices, which are getting stronger after the COVID-19 outbreak.
Unlike the previous studies, the authors analyze the risk appetite sub-indices of various types of investors to reveal behavioral distinctions and interconnectedness across them. The authors use a novel econometric framework to assess investors’ risk appetite in different investment horizons in a time-varying system. Together with volatility index (VIX), the authors also use volatilities of oil (OVX), gold (GVZ) and currency (EVZ), considering the information transmission not only from stock markets but also energy, metals and currency markets. The present data set covers significant financial crises, socioeconomic events and the COVID-19 outbreak.
Can Ergün, Z., Cagli, E.C. and Durukan Salı, M.B. (2022), "The interconnectedness across risk appetite of distinct investor types in Borsa Istanbul", Studies in Economics and Finance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SEF-09-2022-0460
Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited