The effect of investor sensitivity on financial investment decisions: A research on Turkey

Developments in financial markets caused traditional financial models to fall short in explaining financial events. Economists who want to explain these events have benefited from psychology. This area where psychology and finance meet is called behavioral finance. One of the key issues in behavioral finance is investor sentiment. In this study, within the scope of investor sensitivity, the investment instruments preferred by investors in Turkey in situations of fear and trust have been analyzed using time series method. In the study, the Consumer Confidence Index calculated by the Turkish Statistical Institute as an indicator of investor sensitivity and confidence, and three different indices as an indicator of fear were used. These; The Economic Dissatisfaction Index is the Borsa Istanbul Implied Volatility Index and the Turkish Financial Fear Index, which is a new fear index proposal, calculated within the scope of this thesis. In the study, the descriptive statistics of the variables were examined, and then Ziwot-Andrews (1992) Unit Root Test, Lee-Strazicich (2003) Unit Root Tests, which are unit root tests with structural break, have performed. In order to examine the cointegration relationship between variables, Gregory Hansen (1996) Cointegration Test has conducted. In order to examine the causality relationship between variables, Toda Yamamoto (1995) causality test has conducted. As a result of the analysis, some findings were reached. The first of these; Increasing uncertainties in Turkey from time to time cause fear to be a more dominant emotion when making investment decisions in financial markets. The results of the analysis show that the sensitivity of Turkish investors has an influence on investment decisions. Second, it has been found that when fear and confidence dominate investor sentiment, they are less risky, avoid uncertainty, maintain their status quo, and turn to investment instruments they are familiar with.