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Dynamic volatility linkages and hedging between commodities and sectoral stock returns in Turkey: Evidence from SVAR‐cDCC‐GARCH model

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  • İrfan Civcir
  • Uğur Akkoç

Abstract

High volatility in international prices of strategic commodities like oil and gold can have negative effects on the macroeconomics of the emerging economies and their stock markets. This study deals with the analysis of the dynamic relationship between oil, gold and sectoral stock returns in Turkey after the global financial crises. Movements of the sectoral stock returns with the international oil and gold returns have been examined by the Structural Vector Autoregression ‐ corrected Generalized Autoregressive Conditional Heteroskedasticity (SVAR‐cDCC‐GARCH) framework. Our results support the presence of time‐varying co‐movement and volatility spillover from gold and oil to Turkish sectoral stock market. The investigation of volatility has shown that shocks are highly persistent in the long run for all sectoral indices. Furthermore, our results indicate that volatility spillover from international commodity to sectoral indices vary significantly. Results imply that Turkey needs dynamic macroeconomic policies to manage the spillover effects of volatility. The results are also valuable to investors in reducing the risk of their portfolios by diversifying and hedging their investment across different sectors.

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  • İrfan Civcir & Uğur Akkoç, 2021. "Dynamic volatility linkages and hedging between commodities and sectoral stock returns in Turkey: Evidence from SVAR‐cDCC‐GARCH model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1978-1992, April.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:2:p:1978-1992
    DOI: 10.1002/ijfe.1889
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