Behaviour of Stock Returns During COVID-19 Pandemic: Evidence from Six Selected Stock Market in the World
This paper investigates the short term return behavior of six selected stock market around the world during the COVID-19 Pandemic. USA, Indonesia, India, South Korea, Saudi Arabia, and Singapore are selected based on the size of their stock market and the countries have taken a considerable amount of decision and policy to mitigate the risk of before, ongoing, and aftermath COVID-19 Pandemic. This study relies on two major time series investigation techniques, namely Econometric Modeling of returns; The Autoregressive model, Assumption of Linearity, Volatility Modeling, namely the GARCH and WBAVR Test. The results suggest that the stock return behavior in six selected countries occurs in different forms. Our findings suggest that the policymakers must understand how to shift their policy to mitigate the risk of COVID-19 in the financial sector, since we observe a strong correlation between the public health crisis and stock market performances.
Ackert, L. F., Church, B. K., & Deaves, R. (2003). Emotion and financial markets. Federal Reserve Bank of Atlanta Economic Review, 88(2), 33-41.
Ball, R. (2009). The global financial crisis and the efficient market hypothesis: what have we learned?. Journal of Applied Corporate Finance, 21(4), 8-16. doi: https://doi.org/10.1111/j.1745-6622.2009.00246.x.
Chen, M. H., Jang, S. S., & Kim,W. G. (2007). The impact of the SARS outbreak on Taiwanese hotel stock performance: an event-study approach. International Journal of Hospitality Management, 26(1), 200-212. doi: https://doi.org/10.1016/j.ijhm.2005.11.004.
Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica: Journal of the Econometric Society, 50(4), 987-1007. doi: https://doi.org/10.2307/1912773.
Hsieh, D. A. (1991). Chaos and nonlinear dynamics: Application to financial markets. The Journal of Finance, 46(5), 1839-1877. doi: https://doi.org/10.1111/j.1540-6261.1991.tb04646.x.
Hsieh, T. Y., Kuo, W. H., & Lee, H. I. (2013). The week effect of the returns and volatilities: The case of the Taiwanese stock and option markets. Journal of Asian Business Strategy, 3(10), 270-277.
LeRoy, S. F., & Porter, R. D. (1981). The present-value relation: Tests based on implied variance bounds. Econometrica: Journal of the Econometric Society, 49(3), 555-574. doi: https://doi.org/10.2307/1911512.
Lee, J. W., & McKibbin, W. J. (2004). Globalization and disease: The case of SARS. Asian Economic Papers, 3(1), 113-131. doi: https://doi.org/10.1162/1535351041747932.
Lu, Y. K., & Perron, P. (2009). Modeling and forecasting stock return volatility using a random level shift model. Journal of Empirical Finance, 17(1), 138-156. doi: https://doi.org/10.1016/j.jempfin.2009.10.001.
Maliszewska, M., Mattoo, A., & Van Der Mensbrugghe, D. (2020). The potential impact of COVID-19 on GDP and trade: A preliminary assessment. Policy Research Working Paper, 9211. World Bank Group. doi: https://doi.org/10.1596/1813-9450-9211.
Markovitz, H. M. (1959). Portfolio selection: Efficient diversification of investments. John Wiley. http://cowles.yale.edu/sites/default/files/files/pub/mon/m16-all.pdf.
Patterson, D. M., & Ashley, R. A. (2000). A nonlinear time series workshop: A toolkit for detecting and indentifying nonlinear serial dependence (Vol. 2). Kluwer Academic Pub.
Price Water House Coopers. (2009). Shariah-compliant funds: A whole new world of investment. https://www.pwc.com/gx/en/financial-services/islamic-finance-programme/assets/shariah-compliant-funds.pdf.
Siu, A., & Wong, Y. R. (2004). Economic impact of SARS: The case of Hong Kong. Asian Economic Papers, 3(1), 62-83.
Samuelson, P. A. (1965). Proof that properly anticipated prices fluctuate randomly. Industrial Management Review, 6(2), 41-49.
Shiller, R. J., (1981). Do stock prices move too much to be justified by subsequent changes in dividends?. The American Economic Review, 71(3), 421-436.
Smith, T. (2006). Globalisation: A systematic Marxian account. Brill.
Stracca, L. (2004). Behavioral finance and asset prices: Where do we stand?. Journal of Economic Psychology, 25(3), 373-405. doi: https://doi.org/10.1016/S0167-4870(03)00055-2.
Timmermann, A., & Granger, C. W. (2004). Efficient market hypothesis and forecasting. International Journal of Forecasting, 20(1), 15-27. doi: https://doi.org/10.1016/S0169-2070(03)00012-8.
WHO. (2019). Coronavirus disease (COVID-19) pandemic. World Health Organization. https://www.who.int/emergencies/diseases/novel-coronavirus-2019.
WHO. (2020). WHO Coronavirus disease (COVID-19) dashboard. World Health Organization. https://covid19.who.int/.