IDEAS home Printed from https://ideas.repec.org/a/jes/wpaper/y2021v13i1p50-70.html
   My bibliography  Save this article

The effects of epidemics on capital markets volatility: A case study of Borsa Istanbul

Author

Listed:
  • Fatih GÜZEL

    (PhD in BA, lecturer at Kırşehir Ahi Evran University, Faculty of Economics and Administrative Sciences, Department of Business Administration, Kırşehir, Turkey)

  • Melek ACAR

    (Professor at Selçuk University, Faculty of Economics and Administrative Sciences, Department of Business Administration, Konya, Turkey)

Abstract

This study examines the effects of epidemics like H1N1, MERS and EBOLA on the volatility of capital markets through the case of Borsa Istanbul. The data set covers the period from 1/2/2009 – 8/11/2020 and consists of daily frequency observations. In the study, first, the appropriate volatility model for BIST 100 Index, which is the main market index of Borsa Istanbul, was determined. ARCH, GARCH, T-GARCH and E-GARCH models were tested to estimate the appropriate volatility model. According to the findings, E-GARCH (1,1) is more suitable for modelling the BIST 100 Index volatility. It was found that the H1N1 pandemic caused an increase in BIST 100 Index volatility, and negative news rather than positive news was effective on BIST 100 volatility. In addition, the effects of COVID-19 pandemic on BIST in the current situation were evaluated. During the pandemic period, the excessive increase in volatility and the negative trend in the return series are remarkable compared to previous periods.

Suggested Citation

  • Fatih GÜZEL & Melek ACAR, 2021. "The effects of epidemics on capital markets volatility: A case study of Borsa Istanbul," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 13(1), pages 50-70, May.
    • Handle: RePEc:jes:wpaper:y:2021:v:13:i:1:p:50-70
    as

    Download full text from publisher

    File URL: https://ceswp.uaic.ro/articles/CESWP2021_XIII1_GUZ.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:cup:cbooks:9781107034662 is not listed on IDEAS
    2. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Al-Awadhi, Abdullah M. & Alsaifi, Khaled & Al-Awadhi, Ahmad & Alhammadi, Salah, 2020. "Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    5. Brooks,Chris, 2014. "Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9781107661455, December.
    6. Zhang, Dayong & Hu, Min & Ji, Qiang, 2020. "Financial markets under the global pandemic of COVID-19," Finance Research Letters, Elsevier, vol. 36(C).
    7. repec:zbw:bofitp:2020_016 is not listed on IDEAS
    8. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    9. Ali, Mohsin & Alam, Nafis & Rizvi, Syed Aun R., 2020. "Coronavirus (COVID-19) — An epidemic or pandemic for financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    10. Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
    11. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    12. World Bank, 2020. "The COVID-19 Pandemic [Pandémie De Covid-19]," World Bank Publications - Reports 33696, The World Bank Group.
    13. Scott R Baker & Nicholas Bloom & Steven J Davis & Kyle Kost & Marco Sammon & Tasaneeya Viratyosin & Jeffrey Pontiff, 0. "The Unprecedented Stock Market Reaction to COVID-19," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 742-758.
    14. Goodell, John W., 2020. "COVID-19 and finance: Agendas for future research," Finance Research Letters, Elsevier, vol. 35(C).
    15. Sharif, Arshian & Aloui, Chaker & Yarovaya, Larisa, 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, Elsevier, vol. 70(C).
    16. Fynnwin Prager & Dan Wei & Adam Rose, 2017. "Total Economic Consequences of an Influenza Outbreak in the United States," Risk Analysis, John Wiley & Sons, vol. 37(1), pages 4-19, January.
    17. Ichev, Riste & Marinč, Matej, 2018. "Stock prices and geographic proximity of information: Evidence from the Ebola outbreak," International Review of Financial Analysis, Elsevier, vol. 56(C), pages 153-166.
    18. Del Giudice, Alfonso & Paltrinieri, Andrea, 2017. "The impact of the Arab Spring and the Ebola outbreak on African equity mutual fund investor decisions," Research in International Business and Finance, Elsevier, vol. 41(C), pages 600-612.
    19. Rabhi, Ayoub, 2020. "Stock market vulnerability to the Covid-19 pandemic: Evidence from emerging Asian stock markets," MPRA Paper 101774, University Library of Munich, Germany.
    20. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. O’Donnell, Niall & Shannon, Darren & Sheehan, Barry, 2021. "Immune or at-risk? Stock markets and the significance of the COVID-19 pandemic," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    2. Kamal, Javed Bin & Wohar, Mark, 2023. "Heterogenous responses of stock markets to covid related news and sentiments: Evidence from the 1st year of pandemic," International Economics, Elsevier, vol. 173(C), pages 68-85.
    3. Smales, L.A., 2021. "Investor attention and global market returns during the COVID-19 crisis," International Review of Financial Analysis, Elsevier, vol. 73(C).
    4. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, August.
    5. Md. Bokhtiar Hasan & Masnun Mahi & Tapan Sarker & Md. Ruhul Amin, 2021. "Spillovers of the COVID-19 Pandemic: Impact on Global Economic Activity, the Stock Market, and the Energy Sector," JRFM, MDPI, vol. 14(5), pages 1-18, May.
    6. Fabio Pisani & Giorgia Russo, 2021. "Sustainable Finance and COVID-19: The Reaction of ESG Funds to the 2020 Crisis," Sustainability, MDPI, vol. 13(23), pages 1-18, November.
    7. Metin Tetik, 2021. "Comparison of News Impacts on Sectoral Stock Returns during the COVID-19 Pandemic in Turkey," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 7(2), pages 35-46, December.
    8. Shaista Wasiuzzaman, 2022. "Impact of COVID-19 on the Saudi stock market: analysis of return, volatility and trading volume," Journal of Asset Management, Palgrave Macmillan, vol. 23(4), pages 350-363, July.
    9. Alomari, Mohammad & Al Rababa'a, Abdel Razzaq & Ur Rehman, Mobeen & Power, David M., 2022. "Infectious diseases tracking and sectoral stock market returns: A quantile regression analysis," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    10. Jialei Jiang & Eun-Mi Park & Seong-Taek Park, 2021. "The Impact of the COVID-19 on Economic Sustainability—A Case Study of Fluctuation in Stock Prices for China and South Korea," Sustainability, MDPI, vol. 13(12), pages 1-17, June.
    11. Katarzyna Czech & Michał Wielechowski & Pavel Kotyza & Irena Benešová & Adriana Laputková, 2020. "Shaking Stability: COVID-19 Impact on the Visegrad Group Countries’ Financial Markets," Sustainability, MDPI, vol. 12(15), pages 1-19, August.
    12. Peng-Fei Dai & Xiong Xiong & Zhifeng Liu & Toan Luu Duc Huynh & Jianjun Sun, 2021. "Preventing crash in stock market: The role of economic policy uncertainty during COVID-19," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-15, December.
    13. Shi Chen & Cathy Yi-Hsuan Chen & Wolfgang Karl Hardle, 2020. "A first econometric analysis of the CRIX family," Papers 2009.12129, arXiv.org.
    14. Wang, Zhixuan & Dong, Yanli & Liu, Ailan, 2022. "How does China's stock market react to supply chain disruptions from COVID-19?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    15. Ozkan, Oktay, 2021. "Impact of COVID-19 on stock market efficiency: Evidence from developed countries," Research in International Business and Finance, Elsevier, vol. 58(C).
    16. Salisu, Afees A. & Vo, Xuan Vinh & Lucey, Brian, 2021. "Gold and US sectoral stocks during COVID-19 pandemic," Research in International Business and Finance, Elsevier, vol. 57(C).
    17. Elżbieta Kacperska & Jakub Kraciuk, 2021. "Changes in the Stock Market of Food Industry Companies during the COVID-19 Pandemic—A Comparative Analysis of Poland and Germany," Energies, MDPI, vol. 14(23), pages 1-17, November.
    18. Parminder Kaur & Ravi Singla, 2022. "Modelling and forecasting Nifty 50 using hybrid ARIMA-GARCH Model," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 14(1), pages 7-20, June.
    19. Syed Kamran Ali Haider & Shujahat Haider Hashmi & Ishtiaq Ahmed, 2017. "Systematic Risk Factors And Stock Return Volatility," APSTRACT: Applied Studies in Agribusiness and Commerce, AGRIMBA, vol. 11(1-2), September.
    20. Katarzyna Czech & Michał Wielechowski, 2021. "Is the Alternative Energy Sector COVID-19 Resistant? Comparison with the Conventional Energy Sector: Markov-Switching Model Analysis of Stock Market Indices of Energy Companies," Energies, MDPI, vol. 14(4), pages 1-17, February.

    More about this item

    Keywords

    H1N1; MERS; Ebola; COVID-19; Stock Market Volatility; Borsa Istanbul;
    All these keywords.

    JEL classification:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jes:wpaper:y:2021:v:13:i:1:p:50-70. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alupului Ciprian (email available below). General contact details of provider: https://edirc.repec.org/data/csjesro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.