Volatility Dynamics of the BIST Corporate Governance Index:
Evidence from a GARCH Approach
M. Talha AKGÜN*, M. Asım KANTAR** and Halil Gökhan TAŞ***
Department of Business Administration, Faculty of Economics and Administrative Sciences, Erzurum Technical University / Institute of Social Sciences, Department of Finance, Istanbul University, Türkiye This email address is being protected from spambots. You need JavaScript enabled to view it. / This email address is being protected from spambots. You need JavaScript enabled to view it.*
Department of Business Administration, Faculty of Economics and Administrative Sciences, Erzurum Technical University, Türkiye This email address is being protected from spambots. You need JavaScript enabled to view it.**
Vocational School of Social Sciences, Atatürk University, Türkiye, This email address is being protected from spambots. You need JavaScript enabled to view it.***
Abstract: This study examines the volatility dynamics of the Borsa Istanbul Corporate Governance Index (KURY) by focusing on the effects of political risk and investor sentiment. Using weekly data from November 2013 to March 2025, a GARCH(1,1) model evaluates how Türkiye’s five-year Credit Default Swap (CDS) spreads and the Risk Propensity Index (REKS) influence market behaviour. The results show that neither CDS nor REKS significantly affects average returns, but volatility is persistent and clearly clustered. CDS spreads have a strong positive impact on volatility, indicating that sovereign risk plays a central role in shaping uncertainty in governance-based equities. In contrast, REKS does not show a meaningful effect. These findings suggest that external risk perceptions are more influential than domestic sentiment in explaining volatility and provide useful insights for investors and policymakers concerned with financial stability
Keywords: Corporate Governance Index, Sovereign risk, Risk Propensity Index, Volatility.
