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The Impact of Covid-19 on Emerging Stock Market Volatility: Empirical Evidence from Borsa Istanbul

Year 2020, Volume: 5 Issue: Özel Sayı, 269 - 279, 26.12.2020

İbrahim Yağlı

https://doi.org/10.30784/epfad.826736
Cited By: 2

Abstract

The study aims to examine the impact of COVID-19 on the Turkish stock market volatility and reveal how different industries are affected by COVID-19. Volatility between pre-COVID and COVID periods are compared across industries to understand the impact of the first shock. Markov-switching dynamic regression (MSDR) model is employed to determine the transition from low volatility (pre-COVID) period to high volatility (COVID) period. The findings reveal a significant deterioration in volatility for all industries during the COVID-period, with a more dominant impact on the service sector. Then, factors that drive stock market volatility are investigated to understand the role of COVID-19 on increasing volatility. Results show that COVID-19 patients trigger volatility for all industries except food & beverages, insurance, non-metal mineral product, and wholesale & retail trade. On the other hand, an increase in the number of recoveries results in lower volatility for most of the industries. Besides, credit default swap increases volatility while the exchange rate lowers volatility. However, the magnitudes of credit default swap and exchange rate are greater than those of patients and recoveries, suggesting that COVID-19 is not the main driver of volatility for the Turkish stock market in the pandemic period.

Keywords

COVID-19 Industry-Level Volatility Emerging Market Economy

References

  • Al-Awadhi, A. M., Al-Saifi, K., Al-Awadhi, A. and Alhamadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27. doi.org/10.1016/j.jbef.2020.100326
  • Albulescu, C. T. (2020). COVID-19 and the United States financial markets’ volatility. Finance Research Letters. Advance online publication. doi.org/10.1016/j.frl.2020.101699
  • Altig, D., Baker, S., Barrero, J. M., Bloom, N., Bunn, P., Chen, S., ... and Mizen, P. (2020). Economic uncertainty before and during the COVID-19 pandemic. Journal of Public Economics, 191. doi.org/10.1016/j.jpubeco.2020.104274
  • Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: Cases or fatalities?. Research in International Business and Finance, 54. doi.org/10.1016/j.ribaf.2020.101249
  • Baek, S., Mohanty, S. K. and Mina, G. (2020). COVID-19 and stock market volatility: An industry level analysis. Finance Research Letters, 37. doi.org/10.1016/j.frl.2020.101748
  • Baker, S. R., Bloom, N., Davis, S. J., Kost, K., Sammon, M. and Viratyosin, T. (2020). The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies. 10(4), 742-758. doi.org/10.1093/rapstu/raaa008
  • Hamilton, J. D. (1996). Specification testing in Markov-switching time-series models. Journal of Econometrics, 70(1), 127-157. doi.org/10.1016/0304-4076(69)41686-9
  • Hamilton, J. D. (2010). Regime switching models. In S. N. Durlau and L E. Blume (Eds.), Macroeconometrics and time series analysis (pp. 202-209). Palgrave Macmillan, London. doi.org/10.1057/9780230280830_23
  • Haroon, O. and Rizvi, S. A. R. (2020). COVID-19: Media coverage and financial markets behavior—A sectoral inquiry. Journal of Behavioral and Experimental Finance, 27. doi.org/10.1016/j.jbef.2020.100343
  • Huo, X. and Qiu, Z. (2020). How does China’s stock market react to the announcement of the COVID-19 pandemic lockdown?. Economic and Political Studies, Advance online publication. doi.org/10.1080/20954816.2020.1780695
  • International Monetary Fund. (2020). World economic outlook update (June 2020). Retrieved from https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
  • Investing Database. (2020). Stock price, exchange rate and credit default swap. Retrieved from https://www.investing.com/
  • Narayan, P. K., Phan, D. H. B. and Liu, G. (2020). COVID-19 lockdowns, stimulus packages, travel bans, and stock returns. Finance Research Letters. Advance online publication. doi.org/10.1016/j.frl.2020.101732
  • Ozturk, O., Sisman, M. Y., Uslu, H. and Çıtak, F. (2020). Effect of COVID-19 outbreak on Turkish stock market: a sectoral-level analysis. Hitit University Journal of Social Sciences Institute, 13(1), 56-68. doi.org/10.17218/hititsosbil.728146
  • Rizvi, S. A. R. and Arshad, S. (2018). Understanding time-varying systematic risks in Islamic and conventional sectoral indices. Economic Modelling, 70, 561-570. doi.org/10.1016/j.econmod.2017.10.011
  • Sharif, A., Aloui, C. and Yarovaya, L. (2020). COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach. International Review of Financial Analysis, 70. doi.org/10.1016/j.irfa.2020.101496
  • Turkey Statistical Institute. (2020a). Industry database. Retrieved from data.tuik.gov.tr/Kategori/GetKategori?p=Industry-114
  • Turkey Statistical Institute. (2020b). Economic confidence database. Retrieved from data.tuik.gov.tr/Kategori/GetKategori?p=Economic-Confidence-117
  • Topcu, M. and Gulal, O. S. (2020). The impact of COVID-19 on emerging stock markets. Finance Research Letters, 36. doi.org/10.1016/j.frl.2020.101691
  • Zaremba, A., Kizys, R., Aharon, D. Y. and Demir, E. (2020). Infected markets: Novel coronavirus, government interventions, and stock return volatility around the globe. Finance Research Letters, 35. doi.org/10.1016/j.frl.2020.101597
  • Zhang, D., Hu, M. and Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 36. doi.org/10.1016/j.frl.2020.101528

Covid-19'un Gelişmekte Olan Pay Piyasası Oynaklığına Etkisi: Borsa İstanbul'dan Ampirik Bulgular

Year 2020, Volume: 5 Issue: Özel Sayı, 269 - 279, 26.12.2020

İbrahim Yağlı

https://doi.org/10.30784/epfad.826736
Cited By: 2

Abstract

Çalışma, COVID-19'un Türkiye pay piyasası oynaklığı üzerindeki etkisini incelemeyi ve farklı sektörlerin COVID-19'dan nasıl etkilendiğini ortaya çıkarmayı amaçlamaktadır. İlk şokun etkisini anlamak için COVID öncesi ve COVID dönemlerindeki volatilite farklı sektörler için karşılaştırılmıştır. Düşük volatilite (COVID öncesi) dönemden yüksek volatilite (COVID) dönemine geçişi belirlemek için Markov-switching dinamik regresyon (MSDR) modeli kullanılmıştır. Bulgular, tüm sektörler için COVID döneminde oynaklıkta önemli bir bozulma olduğunu ve hizmet sektörü için bozulmanın daha fazla olduğunu ortaya koymaktadır. Daha sonra, COVID-19'un artan oynaklıktaki rolünü anlamak için pay piyasası oynaklığını yönlendiren faktörler araştırılmıştır. Sonuçlar, COVID-19 hastalarının gıda & içecek, sigorta, metal olmayan mineral ürünler ile toptan & perakende ticaret sektörleri dışındaki tüm sektörlerde oynaklığı tetiklediğini ortaya çıkarmıştır. Öte yandan, iyileşenlerin sayısındaki artış, çoğu sektör için daha düşük oynaklığa neden olmaktadır. Ayrıca, kredi temerrüt takası pay piyasası oynaklığını artırırken, döviz kuru piyasa oynaklığını azaltmaktadır. Bununla birlikte, kredi temerrüt takası ve döviz kurunun piyasa oynaklığı üzerindeki etkisi, hastalar ve iyileşenlerin etkisinden daha büyüktür. Bu sonuçlar pandemi döneminde Türkiye için COVID-19'un pay piyasası oynaklığın ana faktörü olmadığını göstermektedir.

Keywords

COVID-19 Sektörel Oynaklık Yükselen Piyasa Ekonomisi

References

  • Al-Awadhi, A. M., Al-Saifi, K., Al-Awadhi, A. and Alhamadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27. doi.org/10.1016/j.jbef.2020.100326
  • Albulescu, C. T. (2020). COVID-19 and the United States financial markets’ volatility. Finance Research Letters. Advance online publication. doi.org/10.1016/j.frl.2020.101699
  • Altig, D., Baker, S., Barrero, J. M., Bloom, N., Bunn, P., Chen, S., ... and Mizen, P. (2020). Economic uncertainty before and during the COVID-19 pandemic. Journal of Public Economics, 191. doi.org/10.1016/j.jpubeco.2020.104274
  • Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: Cases or fatalities?. Research in International Business and Finance, 54. doi.org/10.1016/j.ribaf.2020.101249
  • Baek, S., Mohanty, S. K. and Mina, G. (2020). COVID-19 and stock market volatility: An industry level analysis. Finance Research Letters, 37. doi.org/10.1016/j.frl.2020.101748
  • Baker, S. R., Bloom, N., Davis, S. J., Kost, K., Sammon, M. and Viratyosin, T. (2020). The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies. 10(4), 742-758. doi.org/10.1093/rapstu/raaa008
  • Hamilton, J. D. (1996). Specification testing in Markov-switching time-series models. Journal of Econometrics, 70(1), 127-157. doi.org/10.1016/0304-4076(69)41686-9
  • Hamilton, J. D. (2010). Regime switching models. In S. N. Durlau and L E. Blume (Eds.), Macroeconometrics and time series analysis (pp. 202-209). Palgrave Macmillan, London. doi.org/10.1057/9780230280830_23
  • Haroon, O. and Rizvi, S. A. R. (2020). COVID-19: Media coverage and financial markets behavior—A sectoral inquiry. Journal of Behavioral and Experimental Finance, 27. doi.org/10.1016/j.jbef.2020.100343
  • Huo, X. and Qiu, Z. (2020). How does China’s stock market react to the announcement of the COVID-19 pandemic lockdown?. Economic and Political Studies, Advance online publication. doi.org/10.1080/20954816.2020.1780695
  • International Monetary Fund. (2020). World economic outlook update (June 2020). Retrieved from https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
  • Investing Database. (2020). Stock price, exchange rate and credit default swap. Retrieved from https://www.investing.com/
  • Narayan, P. K., Phan, D. H. B. and Liu, G. (2020). COVID-19 lockdowns, stimulus packages, travel bans, and stock returns. Finance Research Letters. Advance online publication. doi.org/10.1016/j.frl.2020.101732
  • Ozturk, O., Sisman, M. Y., Uslu, H. and Çıtak, F. (2020). Effect of COVID-19 outbreak on Turkish stock market: a sectoral-level analysis. Hitit University Journal of Social Sciences Institute, 13(1), 56-68. doi.org/10.17218/hititsosbil.728146
  • Rizvi, S. A. R. and Arshad, S. (2018). Understanding time-varying systematic risks in Islamic and conventional sectoral indices. Economic Modelling, 70, 561-570. doi.org/10.1016/j.econmod.2017.10.011
  • Sharif, A., Aloui, C. and Yarovaya, L. (2020). COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach. International Review of Financial Analysis, 70. doi.org/10.1016/j.irfa.2020.101496
  • Turkey Statistical Institute. (2020a). Industry database. Retrieved from data.tuik.gov.tr/Kategori/GetKategori?p=Industry-114
  • Turkey Statistical Institute. (2020b). Economic confidence database. Retrieved from data.tuik.gov.tr/Kategori/GetKategori?p=Economic-Confidence-117
  • Topcu, M. and Gulal, O. S. (2020). The impact of COVID-19 on emerging stock markets. Finance Research Letters, 36. doi.org/10.1016/j.frl.2020.101691
  • Zaremba, A., Kizys, R., Aharon, D. Y. and Demir, E. (2020). Infected markets: Novel coronavirus, government interventions, and stock return volatility around the globe. Finance Research Letters, 35. doi.org/10.1016/j.frl.2020.101597
  • Zhang, D., Hu, M. and Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 36. doi.org/10.1016/j.frl.2020.101528
There are 21 citations in total.

Details

Primary Language English
Subjects Finance
Journal Section Makaleler
Authors

İbrahim Yağlı 0000-0001-8985-0172

Publication Date December 26, 2020
Acceptance Date December 23, 2020
Published in Issue Year 2020 Volume: 5 Issue: Özel Sayı

Cite

APA Yağlı, İ. (2020). The Impact of Covid-19 on Emerging Stock Market Volatility: Empirical Evidence from Borsa Istanbul. Ekonomi Politika Ve Finans Araştırmaları Dergisi, 5(Özel Sayı), 269-279. https://doi.org/10.30784/epfad.826736

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