Investigation of the Relationship between VIX (Fear) Index and BIST Banking Index

Abstract

Purpose – With the integration of markets into each other, it has become inevitable that an unfavourable situation in one market will spread to the other market. This situation, called the volatility spillover effect, is closely monitored by investors through various indicators. One of these indicators is the VIX index. In this study, the relationship between the banking sector index and the VIX index is investigated. Design/methodology/approach – The closing values of the variables between January 2001 and December 2021 were used in the study. The analysis was carried out using monthly data of the VIX Index and XBANK (Banking Index) variables in Borsa Istanbul. Price index is used for the banking index. Eviews 10 programme was used for data analysis in the study. Findings – The results of the study are in line with other studies in the literature and the relationship between them is negative. The findings obtained from correlation analysis and quantile regression analysis are consistent with the view in the literature that the relationship between the VIX index and securities markets is negative for the period under review. Discussion – Considering the studies conducted in Turkey, although the studies on BIST sector indices are limited, there is no study in which BIST sector indices and the quantile regression method applied in this study are used together. It is thought that this study carried out for this purpose will contribute to the literature.