Investor Sentiment in the Crisis Periods: Evidence from Borsa Istanbul

Abstract

Purpose-This study aims to analyze the effect of investor sentiment on Borsa Istanbul for the crisis periods between 1997 and 2017. Furthermore, whether the pattern of investor sentiment differs between the crises based on their origin as local or international is investigated. Methodology -The crisis periods are determined based on the CMAX methodology and the regression analysis is applied to investigate the effect of investor sentiment on the stock market returns. Findings-From the results of this study it is observed that in the whole period and local crisis period; when closed end fund discount as a proxy for sentiment increases, BIST 100 index returns decrease. Conclusion-Overall, the findings of this study suggest that Borsa Istanbul is sensitive to investor sentiment especially in the crisis periods that originate locally. The results are substantial for portfolio managers; they have to take into consideration investor sentiment while making decisions.

Jumps and stock market variance during the COVID-19 pandemic: Evidence from international stock markets

“…Jumps often contain valuable information that is connected to extreme conditions ( Ma et al, 2019 ). More specifically, people are more sensitive to sharp fluctuations (jumps) in the stock market during the COVID-19 pandemic or the crisis because of the increase of investor fear increase ( Smales and Kininmonth, 2016 ; Ergun and Durukan, 2017 ; Goldstein et al, 2017 ; Chang et al, 2020 ; Ftiti et al, 2021 ). In addition, existing studies find that models tend to have better performance during recessions ( Rapach et al, 2010 ; Neely et al, 2014 ).…”