THE TIME-VARYING BETA RISK OF MINING AND QUARRYING SECTOR WITH UNIVARIATE GARCH-TYPE MODELS: THE CASE OF TURKEY

Year 2024, Volume: 4 Issue: 1, 106 - 121

Merve Paker

Abstract

Fast changes in financial markets caused by globalization and floating exchange rate policies increase the dependency and uncertainty between markets, causing volatility which is a statistical measure of the change in the price of financial assets, to display a dynamic structure. This dynamic structure emerges as the reason for the increasing interaction and integration of international developing economies and countries with each other and the strengthening of economic relations. In this case, financial markets become more sensitive to developments and changes, making it difficult for investors to make financial decisions. This situation causes researchers and investors to focus on the concept of risk and volatility models. For this reason, in this study was conducted for the systematic risk or beta risk, which is the risk that the investors who create the risk cannot avoid, for the first time BIST National All index (BIST) and all companies belonging to mining and quarrying are used the daily frequency data on the date of last ten years which 18.11.2011-18.11.2021. For the time-varying beta risk parameters, the Conditional Capital Asset Pricing Model (C-CAPM) is used. Time-varying Linear Market Model (Tv-LMM) is a data production model consistent with C-CAPM is modeled with GARCH, EGARCH, FIGARCH and APARCH that are univariate GARCH type models. According to the findings, to the Bayesian information criterion (BIC), the Akaike’s information criterion (AIC), and the Hannan-Quinn information criterion (HQC) model benchmarking criteria, it was concluded that the GARCH-type model that best models time-varying beta risk differs according to companies. For this reason, the GARCH-type models used are not superior to each other. In addition, it has been concluded that the mining and quarrying companies have the same relationship with the market, there is a leverage effect in all companies on this period and IPEKE is the riskiest investment in this portfolio.

Keywords

Beta Risk, Mining and Quarrying, Univariate GARCH-type Models, Conditional Capital Asset Pricing Model (C-CAPM), Time-varying Linear Market Model (Tv-LMM)

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