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    The effect of exchange rate volatility on the stock market in Türkiye
    (Adana Alparslan Türkeş Bilim ve Teknoloji Üniversitesi, 2026) Erokay, Faruk; Doruk, Ömer Tuğsal
    The interplay between exchange rate fluctuations and domestic equity performance serves as a critical barometer for macroeconomic stability in emerging markets. In Türkiye, measuring this transmission is essential given the nation's dual-currency reliance and susceptibility to exogenous shocks. This thesis investigates time-varying volatility spillover mechanisms between the Turkish foreign exchange markets — specifically the United States Dollar and Euro parities — and the aggregate domestic equity market, proxied by the Borsa Istanbul All Shares Index. The study utilizes high-frequency daily return data spanning the 2022 to 2026 period. The specific research gap addressed by this thesis is a profound chronological and methodological void; existing literature relies on datasets terminating before 2022, employs static correlation frameworks, and utilizes narrow large-capitalization indices. Consequently, previous research fails to capture the recent macroeconomic pivot towards orthodox monetary tightening and the unwinding of state-sponsored foreign exchange protection mechanisms. To resolve these empirical deficiencies, the research abandons restrictive linear assumptions and applies an advanced two-stage Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity methodology. The main empirical findings unambiguously demonstrate that while static models yield spurious, explosive variance artifacts breaching theoretical stability limits, the dynamic specification successfully restores covariance-stationarity to the system. The estimations reveal profound volatility clustering and significant long-term macro-financial memory across both asset classes. Crucially, the near-unity dynamic adjustment parameter provides definitive evidence of a highly resilient, bidirectional feedback loop between the markets. The primary contribution of this study to the existing literature is the empirical synthesis of the historically compartmentalized Flow-Oriented Approach and Portfolio Balance Theory into a unified, bidirectional reality. These findings mandate that institutional investors deploy dynamic risk management strategies to navigate structural volatility, while emphasizing that policymakers must maintain transparency to avert fear-driven contagion within deeply integrated financial ecosystems.