Effect of COVID-19 pandemic process on alternative investment tools

The Covid-19 pandemic, which affected the whole world in the first quarter of 2020, has greatly influenced social and economic life, causing economic uncertainty and fluctuations in both the real economy and financial markets. Increases in case and death numbers have affected financial markets in many countries, including Turkey. The relationship between alternative investment tools has gained a different dimension during the pandemic. This study aims to investigate the effect of the pandemic on alternative financial instruments in Turkey. It is determined whether the existing relationship between alternative investment tools before the Covid-19 pandemic has changed during the pandemic period. Additionally, the effect of changes in case and death numbers on each investment tool is examined. Accordingly, the relationships between stock closing prices, CDS premiums, Bitcoin, ons gold prices, USD/TL exchange rate and overnight repo interest rates before and during the pandemic are identified. The study period is from March 22, 2019, to June 14, 2022. The pre-Covid-19 period is between March 22, 2019, and March 20, 2020, and the Covid-19 period is represented between March 23, 2020, and June 14, 2022. The Covid-19 period is analyzed as pre-vaccination and post-vaccination. The ARDL boundary test approach developed by Pesaran and Shin (1999) and Pesaran et al. (2001), and the Johansen-Juselius (1990) and Johansen (1987, 1989) cointegration analysis methods are used to examine the long-term relationships between the variables. According to the study results, there was no cointegration relationship between alternative investment tools during the pre-Covid-19 period, but there was a relationship during the post-Covid-19 period. It is found that the uncertainty and risk environment caused by the health crisis led investors to alternative investment tools, and the demand for all investment tools in the market increased. Additionally, it is found that the increases in case and death numbers before vaccination particularly affected Bitcoin prices, whereas the increases in death numbers after vaccination particularly affected the BIST index.