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On the effect of COVID-19 and policy uncertainty on the stock market: evidence from India

Author

Listed:
  • Masudul Hasan Adil
  • Salman Haider

Abstract

Purpose - The present study empirically examines the impact of coronavirus disease 2019 (COVID-19) and policy uncertainty on stock prices in India during the COVID-19 pandemic. Design/methodology/approach - To this end, the authors use the daily data by applying the autoregressive distributed lag (ARDL) model, which tests the short- and long-run relationship between stock price and its covariates. Findings - The study finds that increased uncertainty has adverse short- and long-run effects on stock prices, while the vaccine index has favorable effects on stock market recovery. Practical implications - From investors' perspectives, volatility in the Indian stock market has negative repercussions. Therefore, to protect investors' sentiments, policymakers should be concerned about the uncertainty induced by the COVID-19 pandemic and similar other uncertainty prevailing in the financial markets. Originality/value - This study used the news-based COVID-19 index and vaccine index to measure recent pandemic-induced uncertainty. The result carries some policy implications for an emerging economy like India. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-03-2023-0244

Suggested Citation

  • Masudul Hasan Adil & Salman Haider, 2023. "On the effect of COVID-19 and policy uncertainty on the stock market: evidence from India," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 51(9), pages 1123-1135, December.
    • Handle: RePEc:eme:ijsepp:ijse-03-2023-0244
    DOI: 10.1108/IJSE-03-2023-0244
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    More about this item

    Keywords

    COVID-19; Pandemic; Stock market; Twitter-based uncertainty; India; Vaccine development; G10; G38;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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