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Do the stocks' returns and volatility matter under the COVID-19 pandemic? A Case Study of Pakistan Stock Exchange

Author

Listed:
  • Muhammad Saeed

    (PhD Scholar, School of Economics and Finance, Xi’an Jiaotong University, China)

  • Ijaz Ahmad

    (PhD Scholar, School of Economics and Finance, Xi’an Jiaotong University, China)

  • Muhammad Ahmad Usman

    (PhD Scholar, School of Economics and Finance, Xi’an Jiaotong University, China)

Abstract

The catastrophe that the world is now facing in the form of COVID-19, has affected most of the world economies and financial markets as a result of lockdown, travelling restrictions, and social distances. The present study attempted to investigate the effects of COVID-19 on the stock returns of the Pakistan Stock Exchange. The data employed comprises daily prices of Pakistan Stock Exchange, the daily value of exchange rate over the period 01 January 2011 to 30 April 2021, and a dummy variable for COVID-19 which takes 1 for the period during COVID-19 and 0 for the period before. The data were sourced from the Karachi Stock Exchange website, National Institute of Health Sciences Pakistan, and State Bank of Pakistan. We applied the autoregressive conditional heteroskedastic (ARCH) and the associate generalized autoregressive conditionally heteroskedastic (GARCH) approaches to analyze the impact. Our findings revealed that a negative relationship exists between our variables of interest with mean returns and a positive relationship with the volatility of the KSE-100 index. This implies that the COVID-19 pandemic has affected the stock price and increases the volatility of the KSE-100 index, and further affects the financial system. The study recommends that an urgent and powerful response is needed on the part of the government,including strong measures to prevent a severe stock market crash in Pakistan in near future.

Suggested Citation

  • Muhammad Saeed & Ijaz Ahmad & Muhammad Ahmad Usman, 2021. "Do the stocks' returns and volatility matter under the COVID-19 pandemic? A Case Study of Pakistan Stock Exchange," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(1), pages 13-26, june.
    • Handle: RePEc:ani:irdjoe:v:3:y:2021:i:1:p:13-26
    DOI: 10.52131/joe.2021.0301.0022
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    References listed on IDEAS

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    Cited by:

    1. Ghulam Ghouse & Muhammad Ishaq Bhatti & Muhammad Hassam Shahid, 2022. "Impact of COVID-19, Political, and Financial Events on the Performance of Commercial Banking Sector," JRFM, MDPI, vol. 15(4), pages 1-18, April.

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