Investigating the Impact of COVID-19 on Stock Market Volatility Using the Smooth Threshold Model with an Emphasis on Economic Policies

This study aims to investigate the impact of the COVID-19 pandemic on stock market volatility, with a specific focus on the role of economic policies. The primary objective is to identify and analyze how the stock market responds to the COVID-19 crisis and the influence of economic policies on these responses. 

To achieve the research objectives, the Smooth Transition Regression (STR) model was used to analyze stock market data from 1991 to 2022. Initially, stock market volatility was calculated using the ARCH and GARCH models. Then, the impact of COVID-19 and other economic variables on stock market volatility was assessed using the smooth threshold model.

The findings of this study indicate that the COVID-19 crisis has had a positive and significant impact on stock market volatility. Additionally, changes in economic policies during the pandemic have led to increased market volatility. The study also revealed that during the COVID-19 period, stock market volatility was highly influenced by macroeconomic variables such as interest rates and industrial production indices. 

The study concludes that the COVID-19 crisis significantly increased stock market volatility, largely due to economic uncertainties and investors' psychological behaviors. The findings provide valuable insights for policymakers and market participants in better managing market volatility during similar economic and health crises.