The effect of Central Bank monetary policies and global events on herd behavior in Turkish equity market

In the study, during crisis and shock periods, investigating the existence of herd behavior in the Borsa Istanbul stock market and effects of The Central Bank of the Republic of Türkiye monetary policies on herd behavior; beta herding in the Hwang and Salmon (2007) methodology was used as a measure of herd behavior. As a result of the study, sharp increases in the herd behavior towards the market were detected during the global crisis, pandemic and market rising periods. In addition, it was found that the tendency of herd behavior increases during periods of increased uncertainty due to internal events in Turkey. Decisions and announcements of the central bank may send signals that affect the behavioral, cognitive and psychological biases of investors. Therefore, in order to determine whether monetary policy decisions have an effect on the behavior of investors, the effect of the conventional and unconventional monetary policy decisions of the Central Bank of the Republic of Turkey on the herd behavior was examined by applying the Autoregressive Distributed Lag (ARDL) bound test. As a result of the analysis, it was determined that the interest rate corridor and reserve option mechanism, which are unconventional monetary policy instruments effect the herd behavior and are important tools in ensuring financial stability.