Abstract:

With the World Health Organization's declaration of COVID-19 as a pandemic in 2020, it caused major shocks in the global economy in the ongoing process. With the pandemic, global supply chains and commodity prices were severely affected. The rise in commodity prices increased the inflationary pressures on the national economies. Inflationary pressures, on the other hand, also affected the cash flows of companies and thus the prices of their stocks. This situation was inevitable to affect the risk appetite of financial investors. In this study, the causality relationship between the Infectious Diseases Index (EMVID), which is accepted as the reflection of the COVID-19 pandemic on financial markets, and the Risk Appetite Index (RISE), which is an indicator of risk appetite for investors in Türkiye, has been investigated. Granger Causality and Breitung and Candelon Frequency causality tests were carried out using the weekly data of the related variables between January 2000 and September 2022. According to the Granger Causality test results, a causality relationship was determined from the EMVID index to the RISE index. According to the Breitung and Candelon Frequency Causality test results, both permanent and temporary causality relationships were determined from the EMVID index to the RISE index.

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