This study examines the volatility dynamics of BIST indices (high-frequency daily data) under the influence of the Geopolitical Risk Index (GPR), a low-frequency factor, using the GARCH-MIDAS model. Volatility components, including short- and long-term factors, were estimated for 12 BIST indices from various sectors. The short-term parameters (α and β) reveal the sensitivity of index volatility to past shocks and volatility, while the long-term parameters (θ, ω, and m) evaluate the impact of geopolitical risk on long-term volatility.

The results indicate that the effect of geopolitical risk on indices varies significantly across sectors. For instance, indices such as XU30 and XKURY show a significant impact of geopolitical risk on volatility, whereas the effect is minimal for indices like XUHIZ and XINSA. Notably, indices such as XMADN exhibit a strong influence of geopolitical risk on volatility. These findings suggest that sectoral structural differences and varying levels of sensitivity to geopolitical risk play a critical role.

Model performance metrics (BIC and Log-Likelihood) demonstrate high goodness-of-fit across all models. The findings provide valuable insights into the effects of geopolitical risk on financial markets, aiding in the development of risk management strategies. This study sheds light on the sectoral impacts of geopolitical uncertainties on volatility, offering crucial guidance for investors and policymakers.