Reflections of healt sector crisis on financial markets

Covid-19 outbreak has affected both real and financial markets, as well as social and cultural life. The aim of this study is to investigate the impact of Covid-19 outbreak on financial markets via BIST100 index by employing Markov Switching GARCH (MS-GARCH) method over the period of 2019-2020. The preliminary analysis reveals that the returns of the BIST100 index is not linear. The empirical findings indicate that there are two different regimes in the returns of BIST100 index in the sample period. The results provide an evidence that the high-risk first regime is more volatile than the low-risk zeroth regime. On the other hand, the duration of zeroth regime persists long period compare to the duration of the first regime. Covid-19 outbreak covers the longest period in the high-risk and negative-return first regime. This implies that the negative returns due to the Covid-19 outbreak sustains relatively longer period in Turkish financial market. The findings of the study suggest that Turkish financial markets are highly sensitive to the shocks caused by the Covid-19 outbreak.