The effect of the fear index, dollar index and bitcoin on volatility: An example from Borsa Istanbul

Abstract

The effect of the Russia–Ukraine war has fluctuated in Europe and Asia's economic conjuncture by virtue of constant shifting balances. The portfolios of investors who made decisions in uncertain conditions have been affected by these fluctuations that have caused volatility in the stock market's indexes. The aim of this study is to examine the impact of the Fear Index (FI), the Dollar Index, and Bitcoin on the volatility of the Borsa Istanbul 100 Index (BIST). Autoregressive distributed lag (ARDL) time series analysis was used for the study, which revealed that the Dollar Index has no effect on volatility, while the FI was found to have an effect on volatility both in the short and long runs. In addition, Bitcoin was determined to have an effect on volatility only in the long run. When the period of the data used is examined, the outbreak of the Russia–Ukraine war in February 2022 is thought to be the reason for the increase in the FI. It can be assumed that the decisions of investors to invest in the BIST were adversely affected by the war as a natural consequence of this, and investors who ceased investing in the BIST index opted to invest elsewhere.