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Diversification benefits of Turkey-based investors: evidence from top trading partners based on a multivariate-GARCH approach

Author

Listed:
  • Nagihan Kılıç
  • Burhan Uluyol
  • Kabir Hassan

Abstract

Purpose - The aim of this study is to measure portfolio diversification benefits of the Turkey-based equity investors into top trading partner countries. Portfolio diversification benefits are analyzed from the viewpoint of two types of investors in Turkey: conventional equities investors and Islamic equity investors. Design/methodology/approach - In order to evaluate the time-varying correlations of the trading partner country's stock index returns with the Turkish stock index returns, the multivariate-generalized autoregressive conditional heteroskedasticity–dynamic conditional correlation (GARCH-DCC) is applied based on daily data covering 13 years' period between January 22, 2008 and January 22, 2021. Findings - The results revealed that the US stock indices provide the most diversified benefit for both conventional and Islamic Turkey-based equity investors. In general, Islamic indices exhibit relatively lower correlation with trading partners than conventional indices. Turkey and Russia are recorded as the most volatile indices. Originality/value - The diversification potential in trading partners for Turkey-based Islamic equity investors has not been studied yet. This study is to fill in this gap in the literature and to give fruitful insights to both conventional and Islamic investors.

Suggested Citation

  • Nagihan Kılıç & Burhan Uluyol & Kabir Hassan, 2022. "Diversification benefits of Turkey-based investors: evidence from top trading partners based on a multivariate-GARCH approach," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 40(4), pages 870-888, May.
    • Handle: RePEc:eme:jeaspp:jeas-11-2021-0226
    DOI: 10.1108/JEAS-11-2021-0226
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