Examining the International Portfolio Diversification Benefits of the Turkish Stock Market (BIST100Index) with Some Major Emerging and Developed Markets: A Diagonal BEKK Approach

V. Anadolu International Conference in Economics, Eskişehir, Türkiye, 14 Mayıs 2017, ss.1-2

Since the 1980s, the increased liberalisation process in the global financial system and extent of international

capital inflows have raised the importance of the construction of well-diversified portfolios. For a portfolio to

be well-diversified, the correlation between the financial assets constituting the portfolio should be low or

negative, which can be achieved by constructing portfolios comprising domestic and foreign financial assets. In

this regard, this study examines the potential international portfolio diversification benefits between the

Turkish stock market and five major emerging (Brazil, Russia, China, South Korea and India) and four developed

(United States, United Kingdom, Germany and France) stock markets after the 2007–2008 global financial crisis

based on conditional time-varying correlation analysis, which is estimated by using the diagonal BEKK model.

The results show that the mean conditional correlations between theBIST100 index and five major emerging

and developed stock markets range from 0.24 to 0.38. These results suggest that the portfolios comprising the

BIST100 index and other emerging and developed country stock markets investigated in this study may provide

significant international diversification benefits for international investors