Volatility Dynamics in Turkish REIT and Sectoral Indices: A Univariate GARCH Approach

Abstract

This study investigates the volatility characteristics of the Turkish REIT Index (XGYO) and major sectoral indices on Borsa Istanbul, including construction, tourism, and finance, from 2014 to 2024. The analysis uses ARIMA models for the mean and univariate GARCH(1,1) models for the variance, incorporating two key macroeconomic variables: the USD/TRY exchange rate and international gold prices. These variables are selected to capture the influence of currency fluctuations and global commodity markets on sectoral volatility. The findings reveal persistent volatility across all sectors, with macroeconomic factors being a key influence. Construction and REITs are most affected by exchange rate fluctuations due to their strong connection to the real estate market, while tourism is more impacted by gold price changes, indicating greater exposure to global uncertainty. By focusing on sector-specific volatility instead of static measures, the study improves understanding of market behavior in emerging economies. It provides practical guidance for investors, portfolio managers, and policymakers, showing that while Turkish REITs can offer stability in diversified portfolios, their effectiveness depends on the macro-financial environment and sector-specific conditions.