The Effect of the COVID-19 Crisis on the Risk and Return Relationship in the Stock Markets of Emerging Countries

Abstract

When the crises experienced throughout history are examined, it is seen that although the crises have common aspects in economic and financial terms, they are not the same. Unlike all previous crises, however, instead of economic and financial considerations, we are faced with the COVID-19 crisis, which is an epidemic disease. Examining the effects of financial crises on financial markets is very important for both investors and countries. Therefore, in the study, the risk-return relationship between the stock markets of India, Brazil, Indonesia, Turkey and South African countries were analyzed with the GARCH-M method in Pre-COVID-19 crisis term and COVID-19 crisis term. As a result of the analysis, it was observed that the response to the COVID-19 crisis occurred mostly in the Turkish stock market, while the reason for the volatility in other stock markets was the previous period. During the COVID-19 crisis, it has been obtained that they provide additional returns to their investors in response to the increased risk in the Indonesian and Turkish stock markets.