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Regime-switching effect of COVID-19 pandemic on stock market index: evidence from Turkey as an emerging market example

Author

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  • Mustafa Tevfik Kartal
  • Fatih Ayhan
  • Derviş Kirikkaleli

Abstract

This study investigates the regime-switching effect of the pandemic on the stock market index in Turkey. Daily data from 3 March 2020 to 31 August 2020 is used, four explanatory variables are included and Markov switching regression is applied. The empirical findings indicate that (i) the index has a long-term cointegration with the explanatory variables included; (ii) the new COVID-19 cases, credit default swap (CDS) spreads and foreign exchange (FX) rates are influential in the high-volatility regime, whereas FX rates are not influential in the low-volatility regime and (iii) net buying amounts of foreign investors are not effective in both regimes.

Suggested Citation

  • Mustafa Tevfik Kartal & Fatih Ayhan & Derviş Kirikkaleli, 2024. "Regime-switching effect of COVID-19 pandemic on stock market index: evidence from Turkey as an emerging market example," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 17(1), pages 189-206, January.
    • Handle: RePEc:taf:macfem:v:17:y:2024:i:1:p:189-206
    DOI: 10.1080/17520843.2022.2091825
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