Effect of Economic, Politics and Geopolitics Crisis on Herd Behaviour in an Emerging Market: Evidence From Borsa Istanbul

Abstract

In this study, herd behaviour in Borsa Istanbul (Istanbul Stock Exchange) is discussed with various dimensions. The study covers the period between January 1993 and May 2019, and the general herd behaviour covering the entire period in Borsa Istanbul as well as the herd and asymmetric herd behaviours in the structural breakperiods calculated with the ICSS algorithm were examined. Moreover, herd behaviour during economic and local political/geopolitical crises and election periods in Turkey, which is a fragile economy, is also examined. According to the empirical results, it has been found that there is herd behaviour in Borsa Istanbul, and that herd behaviour is observed in both rising and falling markets, which is stronger especially in falling markets. It has also been observed in the research that herd behaviour is very evident in times of economic, local political and geopolitical crisis. In addition, the herd effect is also encountered before the elections in the coalition government periods characterized by political uncertainties.