Research Article

Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul

Volume: 10 Number: 3 October 15, 2026
TR EN

Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul

Abstract

This study examines whether the systematic-risk exposure of sustainability-oriented investments varies across market states in Borsa Istanbul. Rather than treating sustainability as an unconditional source of superior performance or financial resilience, the analysis focuses on the regime dependence of market sensitivity. A two-state Markov Regime-Switching Model combined with a Regime-Switching Capital Asset Pricing Model (CAPM) is applied to an equally weighted, dynamically updated sustainability-oriented portfolio over January 2015–December 2025. Portfolio and market returns are expressed as U.S. dollar-denominated excess returns. The results identify two persistent market states with markedly different volatility characteristics. The sustainability-oriented portfolio exhibits a beta of 0.81 in the low-volatility regime and 1.18 in the high-volatility regime, corresponding to a point-estimate increase of 0.37. The high-volatility state is also characterised by negative average excess returns and a return variance 8.5 times that of the low-volatility state. These findings provide evidence that the systematic-risk exposure of sustainability-oriented investments is strongly regime-dependent. However, because portfolio composition and other firm characteristics cannot be fully separated from sustainability status, the findings are interpreted as regime-dependent associations rather than as evidence of a causal sustainability-induced resilience effect. The study complements recent regime-switching evidence from Borsa Istanbul by emphasising dynamic portfolio membership, portfolio-construction sensitivity, and a more conservative interpretation of sustainability-related risk dynamics.

Keywords

References

  1. Albuquerque, R., Koskinen, Y., Yang, S., & Zhang, C. (2020). Resiliency of environmental and social stocks: An analysis of the exogenous COVID-19 market crash. Review of Corporate Finance Studies, 9(3), 593–621. https://doi.org/10.1093/rcfs/cfaa011
  2. Ang, A., & Bekaert, G. (2002). International asset allocation with regime shifts. Review of Financial Studies, 15(4), 1137–1187. https://doi.org/10.1093/rfs/15.4.1137
  3. Atz, U., Van Holt, T., Douglas, E., & Whelan, T. (2023). ESG and financial performance: Uncovering the relationship by aggregating evidence from 1,000 plus studies published between 2015 and 2020. NYU Stern Center for Sustainable Business.
  4. Baker, S. R., Bloom, N., Davis, S. J., Kost, K., Sammon, M., & Viratyosin, T. (2020). The unprecedented stock market reaction to COVID-19. Review of Asset Pricing Studies, 10(4), 742–758. https://doi.org/10.1093/rapstu/raaa008
  5. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
  6. Baruník, J., & Křehlík, T. (2018). Measuring the frequency dynamics of financial connectedness and systemic risk. Journal of Financial Econometrics, 16(2), 271–296. https://doi.org/10.1093/jjfinec/nby001
  7. Bekaert, G., & Harvey, C. R. (2003). Emerging markets finance. Journal of Empirical Finance, 10(1–2), 3–55. https://doi.org/10.1016/S0927-5398(02)00054-3
  8. Bekaert, G., Harvey, C. R., Lundblad, C., & Siegel, S. (2016). Political risk and international valuation. Journal of Corporate Finance, 37, 1–23. https://doi.org/10.1016/j.jcorpfin.2015.12.007

Details

Primary Language

English

Subjects

Panel Data Analysis, Financial Economy, Finance, Financial Markets and Institutions, Finance and Investment (Other)

Journal Section

Research Article

Publication Date

October 15, 2026

Submission Date

July 20, 2026

Acceptance Date

October 6, 2026

Published in Issue

Year 2026 Volume: 10 Number: 3

APA
Ünkaracalar, T. (2026). Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul. Fiscaoeconomia, 10(3), 1-18. https://doi.org/10.25295/fsecon.1999146
AMA
1.Ünkaracalar T. Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul. FSECON. 2026;10(3):1-18. doi:10.25295/fsecon.1999146
Chicago
Ünkaracalar, Tutku. 2026. “Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul”. Fiscaoeconomia 10 (3): 1-18. https://doi.org/10.25295/fsecon.1999146.
EndNote
Ünkaracalar T (October 1, 2026) Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul. Fiscaoeconomia 10 3 1–18.
IEEE
[1]T. Ünkaracalar, “Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul”, FSECON, vol. 10, no. 3, pp. 1–18, Oct. 2026, doi: 10.25295/fsecon.1999146.
ISNAD
Ünkaracalar, Tutku. “Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul”. Fiscaoeconomia 10/3 (October 1, 2026): 1-18. https://doi.org/10.25295/fsecon.1999146.
JAMA
1.Ünkaracalar T. Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul. FSECON. 2026;10:1–18.
MLA
Ünkaracalar, Tutku. “Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul”. Fiscaoeconomia, vol. 10, no. 3, Oct. 2026, pp. 1-18, doi:10.25295/fsecon.1999146.
Vancouver
1.Tutku Ünkaracalar. Regime-Dependent Systematic Risk of Sustainability-Oriented Investments: Evidence from Borsa Istanbul. FSECON. 2026 Oct. 1;10(3):1-18. doi:10.25295/fsecon.1999146
download?token=eyJ1aWQiOjEwMTE3NywiYXV0aF9yb2xlcyI6WyJST0xFX1VTRVIiXSwiZW5kcG9pbnQiOiJqb3VybmFsIiwib3JpZ2luYWxuYW1lIjoiMjAyNi0wMy0xNF8wMC0xOC01OC5wbmciLCJwYXRoIjoiNTVjMC82NjE0LzA5NGEvNjliNDdmNjNjMjdiMDUuMDA4NTE4OTUucG5nIiwiZXhwIjoxNzczNDQwMzcxLCJub25jZSI6IjMzYzNhMDczOTJhZDBiOWUxMjA4MTJlMzAwOTdlMDhjIn0.uxgvoBOu5rdPPckMLotZ4eBnzOQVB_StL3DcxMXqMSU


Fiscaoeconomia is licensed under a Creative Commons Attribution License (CC BY).