Analysis of the impact of the global crisis on the bist30 index with the financial contagion model

Liberalized financial markets in combination with globalization caused emerging economies to face fragility problems. For this reason, the possibility of the crises being felt in other economies has gradually increased. In this case, the fragility and instability in Turkey as in cases in emerging market economies has come to the fore. The Financial Crisis that started in the USA in 2008 gained a global character after a certain period of time and caused losses in many economies. This situation could not be explained by referring only to the structural problems in the basic indicators of the country. Even if the country's economy is successful in its basic macroeconomic indicators, it is capable of being faced with the contagion effect of a crisis. In this context, the panic atmosphere created by the crisis is important enough to change the course of the crisis on investors. Therefore, in this study, a model that tests herd behavior and its contagious effect has been established. The purpose of this study is to test the financial contagion effect and the presence of herd behavior between the S & P500 index and the BIST30 index, based on the cross-sectional absolute deviation over the daily closing prices for the period of 5 July 2006 - 12 November 2019. The analysis period is divided into pre-crisis and post-crisis in order to distinguish the of the crisis. Thus, the change in the investor behavior during the periods will be understood. This is important to analyze the change in the investor behavior under different conditions. Moreover, in the financial contagion model the daily closing prices for every index were tested by converting them into the currency of the country's index. According to the analaysisi results, it has been observed that there is a financial contagion effect for the whole, crisis and post-cirisis period. On the other hand, contrary to expectations herding behavior was found statistically and economically significant only inh the post-crisis period. Another important result of the study is that there is no need to converte the currincies. Because, the harmonization in variables do not change the direction of the relationship.