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

Mustafa Tevfik Kartal, Fatih Ayhan and Dervis Kirikkaleli

Macroeconomics and Finance in Emerging Market Economies, 2024, vol. 17, issue 1, 189-206

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.

Date: 2024
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DOI: 10.1080/17520843.2022.2091825

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