Predictability of risk appetite in Turkey: Local versus global factors

Abstract

We examine the impacts of four local and five global factors on the risk appetite in Turkey using weekly data for the period 2008–2022. There are significant causal effects of both global and local factors under various market conditions. Local factors, particularly CDS spreads, exert stronger causal effects than global factors, and qualified investors are more predictable than domestic or foreign investors. Uncertainty during the pandemic crisis weakens the explanatory powers of most factors. All investor groups are generally exposed to negative shocks and this effect strengthens at lower and middle quantiles. Policy implications are discussed.