The Impact of Political and Global Crises on Stock Market Volatility : the Case Of the Turkish Stock Market
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2023
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Abstract
AI-GENERATED ABSTRACT: Abstract: This master's thesis examines the complex relationship between political and global crises and stock market volatility, focusing on the effects within the context of the Turkish stock market. Utilizing a multifaceted methodology encompassing literature review, analysis of historical numeric data, investor surveys, and expert interviews, this study aims to comprehensively understand the dynamics of this intricate relationship. The literature review specifically delves into the impact of political and global crises on stock market volatility by assimilating past research, reports, and analyses. Findings reveal that political uncertainties, policy changes, conflicts, and geopolitical tensions emerge as significant triggers of increased market volatility. The research presents the Turkish stock market as an example subject to the effects of various political and global crises. Global crises, including financial downturns, pandemics, disruptions in global supply chains, and geopolitical events, are identified as prominent sources of volatility. The study highlights the direct impact of the COVID-19 pandemic on the Turkish stock market, leading to heightened market fluctuations. The influence of local and global news on market volatility is evident, emphasizing the dominance of international news in affecting the Turkish market. Addressing the research questions, the study examines how stock market volatility stemming from crises affects investors and explores potential strategies to mitigate its impact. Surveys and interviews assist in understanding investor behaviors and strategies. Findings encompass varying responses to crisis-induced volatility, including evaluating opportunities through aggressive trading or adopting protective measures like portfolio rebalancing. The study underscores the role of regulatory authorities in reducing volatility and emphasizes the impact of government decisions on market stability. Through the synthesis of results from diverse research methods, the study reaffirms the significant role of political and global crises in amplifying stock market volatility. The literature review demonstrates a consensus among various sources that uncertainties during crises have a clear impact on market volatility. Our analysis highlights macroeconomic variables, types of financial leverage, and crisis types on a global scale and driven by policy decisions as the fundamental contributors to volatility. Historical data, including the VIX volatility index, corroborates the increase in volatility during crisis periods. The study concludes by emphasizing the multifaceted implications of research findings. It urges policymakers and market regulators to acknowledge the impact of political and global crises on market volatility and implement transparent regulatory measures to manage and stabilize markets. Investors are advised to align investment decisions with risk perceptions and long-term goals. The study acknowledges its limitations, particularly its focus on Turkey, and the potential biases introduced by historical data and opinions. In conclusion, this study valuably addresses the intricate interplay between political and global crises and stock market volatility. By tackling this complex relationship, the research offers practical outcomes for policymakers, investors, and market participants. Keywords: stock market volatility, political crises, global crises, Turkish stock market, investor behavior, regulatory authorities, COVID-19 impact, financial leverage, VIX index, risk management