The Determinants of Main Stock Exchange Index Changes in Emerging Countries: Evidence from Turkey in COVID-19 Pandemic Age

16 Pages Posted: 3 Aug 2020

See all articles by Mustafa Tevfik Kartal

Mustafa Tevfik Kartal

Borsa Istanbul

Özer Depren

Yildiz Technical University; Yapi Kredi Bank A.S.

Serpil Kilic Depren

Yildiz Technical University - Statistics Department

Date Written: July 22, 2020

Abstract

With the emergence and spreading of COVID-19 pandemic all over the world, the uncertainty has been increasing for countries. Depending on this condition, especially emerging countries have been affected negatively by foreign portfolio investment outflows from stock exchanges, and main stock exchange indices have been collapsed. The study examines the causes of the main stock exchange index changes in Turkey in the COVID-19 period. In this context, 14 variables (3 global, 6 country-level, 5 market-level) are analyzed by employing random forest and support vector machine algorithms and using daily data between 01.02.2020 and 05.15.2020, which includes the pre-pandemic and the pandemic periods. The findings prove that (i) the most important variables are the retention amount of foreign investors in the equity market, credit default swap spreads, government bonds interest rates, Morgan Stanley Capital International (MSCI) emerging markets index, and volatility index in the pre-pandemic period; (ii) the importance of variables changes as MSCI emerging markets index, the volatility index, retention amount of foreign investors in the equity market, amount of securities held by the Central Bank of Republic of Turkey (CBRT), equity market traded value in the pandemic period; (iii) support vector machine has superior estimation accuracy concerning random forest algorithms in both pre-pandemic and pandemic period.

Keywords: COVID-19 pandemic; determinants; main stock exchange index; machine learning; Turkey

JEL Classification: E44, F32, G12, G13

Suggested Citation

Kartal, Mustafa Tevfik and Depren, Özer and Depren, Serpil Kilic, The Determinants of Main Stock Exchange Index Changes in Emerging Countries: Evidence from Turkey in COVID-19 Pandemic Age (July 22, 2020). Available at SSRN: https://ssrn.com/abstract=3659154 or http://dx.doi.org/10.2139/ssrn.3659154

Mustafa Tevfik Kartal (Contact Author)

Borsa Istanbul ( email )

Reşitpaşa Mah. Borsa İstanbul Cad. No: 4
Borsa İstanbul Cad. No: 4
Istanbul, 34467
Turkey

Özer Depren

Yildiz Technical University ( email )

Davutpasa Mh., Esenler
Besiktas, Istanbul 80750
Turkey

Yapi Kredi Bank A.S. ( email )

Istanbul
Turkey

Serpil Kilic Depren

Yildiz Technical University - Statistics Department ( email )

Istanbul, 34349
Turkey

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