Static and Dynamic Connectedness of the BIST Sustainability Index: A Diebold–Yilmaz Approach

Abstract

Purpose – As market-based indicators of sustainable finance, ESG indices make it increasingly important to analyze their linkages with traditional markets. This study aims to measure the static and dynamic connectedness between Turkiye market’s ESG benchmark (the Borsa Istanbul Sustainability Index (XUSRD)) and domestic equities (BIST 100), global equities (S&P 500), a global ESG benchmark (MSCI World ESG Leaders), and commodities (Brent crude oil, gold).
Design/methodology/approach – Using daily data from 5 January 2015 to 26 March 2025, the Diebold–Yilmaz connectedness framework is implemented to conduct both static and dynamic analyses. Total, directional, and net connectedness measures are computed, alongside time-varying connectedness indicators.
Findings – Static results show moderate systemwide interaction (TCI ≈ 38.6%). The S&P 500 and the global ESG index act as net transmitters, while Brent and gold are net receivers. XUSRD and BIST 100 display a near-neutral profile with a strong bilateral linkage between them. During COVID-19 and the 2022 energy shock, connectedness increases markedly, and diversification opportunities shrink—especially within equity blocks; in normalization phases, the TCI reverts to its mid-range.
Discussion – The evidence indicates that XUSRD exhibits a price-taker profile, has not yet meaningfully decoupled from the domestic equity cycle, and remains sensitive to global transmitters. Gold generally plays a buffering (net-receiver) role, whereas Brent’s influence is regime-dependent and limited. Overall, while some diversification is available in calm regimes, stress episodes bring greater synchronization across equities and narrow the diversification space. The results suggest that the BIST Sustainability Index is not a stand-alone diversifier; rather, it should be managed in conjunction with domestic equities, with global transmitters monitored as early-warning indicators.