The Nexus Between COVID-19 Government Responses and Aviation Stock Prices in Turkey: OxCGRT Stringency Index-Based Analysis

Abstract

Air transportation is the significant mode of transmission, enabling the worldwide spread of infectious diseases through the mobility of infected persons. Therefore, governments applied the most comprehensive restrictions and preventions in civil aviation during COVID-19. The industry is one of the most economically impacted due to travel, and flight restrictions. This paper aims to investigate the long- and short-term nexuses between government responses to COVID-19 and the aviation stock prices traded in Borsa Istanbul. The OxCGRT stringency Turkey index is used to measure the Turkish government responses and policies to COVID-19. In the study, the daily data of Turkish Airlines, Pegasus Airlines, Do&Co Catering, TAV Airport Holding, Celebi Ground Handling stock prices, and the OxCGRT stringency Turkey index for the 24.01.2020-11.11.2021 period were used, and Granger causality and Engle-Granger cointegration tests were applied to reveal the nexuses. In conclusion, there is a cointegration nexus and one-way causality from the index to all Turkish aviation stock prices, except the Celebi Ground Handling stock prices. The contribution of this study is that it is probably the first one in Turkey to reveal the nexus between the government's policy and responses to COVID-19 and aviation stock prices.