Behavioral analysis of stock prices during financial crises: The Case of Borsa İstanbul

This study aims to conduct a behavioural analysis of stocks traded on Borsa Istanbul during financial crisis periods. The impact of financial crises on stock prices has been studied, along with the analysis of investor behaviour during these times. Research shows that investors often act irrationally during crises because of emotional influences and cognitive biases. This situation has led to excessive market fluctuations and irrational decision-making processes, resulting in significant changes in stock prices. The study utilised the EGARCH (1,1) model to analyse stock price volatility, revealing that volatility heightened during crisis periods and remained elevated for an extended duration. It was also observed that negative shocks resulted in greater volatility compared to positive shocks. This finding indicates the lasting impact of financial crises on investor behaviour and market volatility. Additionally, the results of the ARCH test confirmed the presence of changing variance in Borsa Istanbul during crisis periods, revealing increased uncertainty in the price movements of financial assets. From a behavioural finance perspective, it was determined that investors exhibit tendencies such as overconfidence, herd behaviour, and regret avoidance during crises, which lead to excessive price movements in the markets. This shows that uncertainty and irrational behaviour in financial markets increase further during crisis periods. In conclusion, understanding investor psychology and behaviour during financial crises plays a critical role in mitigating the effects of crises and ensuring market stability. This study provides a significant contribution to understanding the impacts of financial crises and preparing for similar future events.