Does the COVID-19 Pandemic Affect the Stock Returns of the Turkish Tourism Industry?

Abstract

The aim of the study is to examine the impact of COVID-19 on the return of the tourism industry by integrating explanatory variables such as ISE index, exchange rate, and interest rate for Turkey over the period of 11 March 2020 to 31 December 2020. The findings obtained indicate that the optimal lag length of VAR model is 1. According to the Granger causality analysis findings, one-way causality is determined running from the COVID-19 confirmed cases and ISE 100 index to the tourism industry returns. At the same time, the tourism industry returns against a standard deviation shock as the number of confirmed cases first increases, then falls, and afterwards stabilizes. Variance decomposition analysis findings show that the change of tourism industry returns in the first week is determined by itself. They also demonstrate that from the second week to the tenth week, the biggest determinant of the change in the tourism industry returns are the ISE 100 index at an average rate of 4%, and the last one is COVID-19 cases.