The determinants of main stock exchange index changes in emerging countries: evidence from Turkey in COVID-19 pandemic age

Mustafa Tevfik Kartal; Özer Depren; Serpil Kılıç Depren; Mustafa Tevfik Kartal; Özer Depren; Serpil Kılıç Depren

doi:10.3934/QFE.2020025

Quantitative Finance and Economics

2020, Volume 4, Issue 4: 526-541. doi: 10.3934/QFE.2020025

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The determinants of main stock exchange index changes in emerging countries: evidence from Turkey in COVID-19 pandemic age

1.
Strategic Planning and Investor Relations Directorate in Borsa İstanbul, İstanbul, Turkey
2.
Customer Experience Researches Directorate in Yapı Kredi Bank, İstanbul, Turkey
3.
Department of Statistics, Yıldız Technical University, İstanbul, Turkey

Received: 04 June 2020 Accepted: 15 July 2020 Published: 22 July 2020
JEL Codes: E44, F32, G12, G13

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.
- COVID-19 pandemic,
- determinants,
- main stock exchange index,
- machine learning,
- Turkey
Citation: Mustafa Tevfik Kartal, Özer Depren, Serpil Kılıç Depren. The determinants of main stock exchange index changes in emerging countries: evidence from Turkey in COVID-19 pandemic age[J]. Quantitative Finance and Economics, 2020, 4(4): 526-541. doi: 10.3934/QFE.2020025

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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.

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