Behavioural analysis of stock prices during financial crises: The case of Borsa Istanbul

This study examines the effects of financial crises on stock prices and analyses how investor behaviour is shaped during these crises. It was found that during crisis periods, investors' behaviours deviate from rationality due to emotional factors and cognitive biases, leading to excessive market volatility and irrational decision-making processes, significantly affecting stock prices. The method used was the Exponential Generalised Autoregressive Conditional Heteroskedasticity (EGARCH) (1,1) model to analyse the volatilities of stock prices. The analysis showed that price volatilities increase during crises and persist for a long time. Notably, adverse shocks were found to create more volatility than positive shocks. This finding demonstrates the lasting impact of financial crises on market fluctuations caused by investor behaviour. From a behavioural finance perspective, it was identified that investors exhibit tendencies such as overconfidence, herd behaviour, and avoidance of regret, leading to excessive price movements in the markets during crisis periods. This situation highlights that uncertainty and irrational behaviours in financial markets increase further during crises, and understanding investor psychology and behaviour plays a critical role in mitigating the effects of crises and ensuring market stability.