VOLATILITY SPILLOVER BETWEEN BIST 30 FUTURES and SPOT MARKETS: A DCC-GARCH ANALYSES

Yönetim Bilimleri Dergisi(2021)

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Abstract
In terms of investors, it is essential to be aware of the flow of information across markets and build up investment policies in line with this information. The volatility spillover relationships between futures and spot markets contain important information in the context of optimal portfolio composing. In this study, the relevant relationship between futures and spot markets in Turkey were investigated in the context of BIST 30 index, using the end-of-day pricing data for the period from 2 February 2006 to 30 April 2020. The volatility spillover effects and the time-varying dynamic conditional relationship between markets was investigated by DCC-GARCH method. The results indicate that there is a strong dependence between markets' return volatilities. Also a significant bidirectional relationship is found in volatility transmissions between the markets. The results of GJR-GARCH analysis, in order to examine the effect of negative and positive shocks on the markets' volatilities indicate that both markets responded more strongly to their negative shocks than to positive shocks. Findings generally indicate that there is a bidirectional causality relationship between price and volatility changes of the markets. This result supports the hypothesis that both markets play a role in volatility spillover.
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Key words
Volatility Spillovers,Volatility,Realized Volatility
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