Asymmetry in return and volatility spillovers between stock and bond markets in Turkey

Abstract

This study analyzes the asymmetric volatility spillovers in the stock and bond (S&B) markets in Borsa Istanbul during 2003-2019. Financial crises have increased the importance of the transition between the S&B markets. Apart from the full period, the 2008 financial crisis period is examined separately to see the effects of the spillovers during the crisis period. First, asymmetric volatility tests with the sign bias test were performed. Then, to find out whether S&B market volatility wwas asymmetric, we investigated with the GJR-GARCH model. Finally, asymmetric volatility was examined between the two markets test with the VARMA-AGARCH model. According to the asymmetric volatility test results, negative volatility asymmetry existed in the bond market for the full period. Asymmetric volatility was positive in both market during the crisis time. Return spillovers from the stock market to bond market for the full period. It was the opposite direction during the crisis period. Volatility spillover was bidirectional between the stock market and the bond market. However, during the global crisis period, volatility spillover was bidirectional from the stock market to the bond market