Crises, Protests, and Political Turbulence: An Event Study of Risk Appetite in Türkiye

Abstract

Introduction: This study investigates major whether economic, political, geopolitical, and
social events in Türkiye shape investor risk appetite and whether the market response differs y
across event types. Understanding these dynamics is important for characterizing risk-on/risk-
off regimes and for designing event-contingent risk management and policy responses

Method: We conduct an event study covering selected events over 2008–2025. Risk appetite is measured by an equally weighted composite index (TRRAI) combining sovereign credit risk (5-year CDS), the exchange rate (USD/TRY), equity returns (BIST-100), and BIST volatility. We estimate abnormal outcomes using (i) an MSCI World–based market model for BIST-100 and (ii) a VIX-based abnormal-change model for TRRAI to control for global risk sentiment. We compare reactions across multiple event windows and decompose TRRAI to quantify component-level contributions.

Results or Findings: Global systemic shocks (e.g., the global financial crisis and COVID-19) generate larger and more persistent risk-off responses in both BIST-100 and TRRAI, especially in wider windows. Domestic uncertainty and institution- or security-related shocks (e.g., protests, institutional disruptions, and the coup attempt) significantly depress risk appetite in shorter windows, while policy-regime shifts and macroprudential interventions exhibit more asymmetric effects in magnitude and persistence. Events involving uncertainty resolution—such as election processes—tend to trigger milder and more heterogeneous short-run reactions.

Discussion or Conclusion: The evidence indicates that risk-off dynamics transmit through distinct channels depending on event type: CDS and FX dominate in some episodes, equities in others, and volatility is particularly salient during global shocks.