INVESTIGATION OF THE RELATIONSHIP BETWEEN TURKEY AND DEVELOPED STOCK MARKETS IN THE PANDEMIC PERIOD: ARDL BOUNDS TESTING APPROACH

Abstract

The integration of stock markets is an essential issue for international investors who aim to make short and long term investments. This paper examines Turkey and developed stock markets co-movements during the pandemic. International portfolio diversification advantages are investigated for Turkish investors who have a portfolio in developed markets. For this purposes, the long-term relationship between stock markets is analyzed using the distributed autoregressive (ARDL) bound test. The study covers the period between January 2019 and April 2021, and this period is divided into two separate periods, pre-pandemic and pandemic. The results of ARDL bounds tests have not found a cointegration relationship between stock markets in both the pre-pandemic period and the pandemic period. Granger causality test results show that NIKKEI 225, DAX, FTSE 100 and CAC 40 are the cause of BIST 100 in the pre-pandemic period. However, Granger causality test results show that there is no causality relationship during the pandemic period. Turkish stock market investors investing in developed stock markets will benefit from portfolio diversification in the long term.