Turkish Stock Market from Pandemic to Russian Invasion, Evidence from Developed Machine Learning Algorithm

Abstract

AbstractIn recent time, the two significant events; Coronavirus epidemic and Russian invasion are effecting all over the world in various aspects; healthily, economically, environmentally, and socially, etc. The first event has brought uncertainties to the economic situation in most countries based on the epidemic transmission. In addition to that, on 24th February 2022 the Russian invasion of Ukraine affected negatively almost all stock markets all over the world, but the effects are heterogeneous across countries according to their economic-political relationship or neighbourhood, etc. Due to that, the stock market price in Turkey has been affected dramatically over that period. This empirical study is the first attempts to explore the impact of Coronavirus epidemic and Russian invasion on the stock market index XU100 in Turkey by applying the developed statistical method namely elastic-net regression based on empirical mode decomposition which can precisely tackle the nonstationary and nonlinearity data. Then we performed the robustness check by applying a nonlinear techniques Markov switching regression. The data are collected from the beginning of the epidemic in Turkey from March 11, 2020 until May 31, 2022. The finding reveals that there is significant effect of the Coronavirus spreading on the Turkish stock market index, particularly during the first wave. Then after the Russian Invasion the XU100 index is effected more negatively. As the credit default swap and TL reference interest rate have a negative impact but the foreigner exchange rate has a positive significant impact on the XU100 index, and it varies according to the period of short term and long term. Moreover, the results obtained by using the robustness check shows a robust and consistent finding. In conclusion, understanding the impact of Coronavirus pandemic and Russian invasion on the Turkish stock market can provide important implications for investors, financial sectors, and policymakers.