Investigating the impact of global and Türkiye-specific geopolitical risks on BIST indices

Abstract

This research provides insights into how geopolitical developments influence investment strategies and risk pricing in emerging markets. The study examines the effects of global and Türkiye-specific geopolitical risks on the stock indices traded on BIST. Utilising the Geopolitical Risk index (GPR) and a Türkiye-specific Geopolitical Risk index (GPRT), analyses the asymmetric impacts of these risks on 10 sectoral indices. The findings contribute to understanding the complex interplay between geopolitical events and financial market dynamics, offering valuable information for investors and policymakers seeking to navigate geopolitical uncertainties effectively. The study employs an NARDL model, utilising a comprehensive dataset from February 1997 to January 2025, which incorporates monthly closing prices of BIST indices and geopolitical risk indices. The results shed light on the differential sensitivity of Turkish stock indices to global and domestic geopolitical risks, highlighting the importance of considering these factors in investment decisions.