Abstract:

The aim of this study is to investigate the integration level of Borsa Istanbul 100 (BİST100) index with regional indexes considering developed and emerging market segments. For this purpose, using a daily data set covering 09.07.2012-19.02.2021 period, interactions between BİST100 index and seven regional indexes constituted by MSCI as well as MSCI World and MSCI Emerging Market indexes are examined. At the first stage of the study, dynamic conditional correlations are estimated by bivariate DCC-GARCH method and positive and significant coefficients are obtained for all index pairs. Highest correlations with BİST100 belong to MSCI emerging Europe and MSCI developed Europe indexes respectively. The weakest correlation of BİST100 is observed with MSCI-GCC index. Conditional correlations of BİST100 and emerging markets are higher than those of BİST100 and developed markets. At the second stage, Diebold and Yilmaz (2012) spillover index is performed in order to determine the direction of interactions. Findings of return and volatility spillovers suggest that the interactions among Borsa İstanbul and regional indexes are weak. Results obtained from the analysis are expected to be useful for both policy makers in the sense of benefits and costs of financial integration and investors in their portfolio decisions.