Investigating the Risk Appetite Index with Markov Regime Model: Case of Turkey


Creative Commons License

Akdag S., Iskenderoglu O.

EGE ACADEMIC REVIEW, vol.19, no.2, pp.265-275, 2019 (Journal Indexed in ESCI) identifier

  • Publication Type: Article / Article
  • Volume: 19 Issue: 2
  • Publication Date: 2019
  • Doi Number: 10.21121/eab.556341
  • Title of Journal : EGE ACADEMIC REVIEW
  • Page Numbers: pp.265-275

Abstract

Financial markets changes dynamically along with many internal and external factors. Investors' risk appetite is one of the key elements of volatility in financial markets. Risk appetite indexes are data published by the Central Securities Depository Institution having importance in terms of positioning besides determination for markets and investors. In this study, it is examined whether or not the calculated risk appetite index of all investors in Turkey is separated into regimes parametrically. On this respect, an analysis of Markov Regime Model has been employed on riskappetite index of all investors utilizing the weekly frequency data spanning from 2008 to 2016. The results from the study reveals that the risk appetite can be divided into high volatility and low volatility regimes parametrically. In addition, the economic crisis, political instability, increasing terror attacks in the World and Turkey are found to occur during the period of high volatility regime of risk apetite.