COVID-19 outbreak and performance of financial markets: evidence from the stock market, the foreign exchange market and cryptocurrencies market in Nigeria

The study investigated performance of the stock market, foreign exchange market and the cryptocurrencies market as a result of COVID-19 outbreak. Event studies methodology was employed to determine the abnormal return (AR) and corresponding cumulative abnormal return (CAR) following the first confirmed case of the pandemic and the first recorded case of fatality, after controlling for the concurrent effect of crude price fluctuations. Consistent with previous studies, the paper documented evidence of negative reaction of -0.34% and -1.01% for the Nigerian stock market and the cryptocurrency market respectively at the announcement of first case of the pandemic's outbreak. The study also documented negative and statistically significant effects of -1.71% and -0.78% for Nigerian stock market and the cryptocurrency market respectively when the first case of death was announced. Adverse effect of the pandemic was found to be stronger when the first case of death was announced compared to first reported case of the outbreak. However, negative but insignificant effect was recorded for the foreign exchange market. The paper concluded that negative reaction for the stock market is consistent with market panic and policy uncertainty during the pandemic. Furthermore, adverse effect of the pandemic on the cryptocurrency market was due to increased co-movement of the market with regulated financial markets such as the stock market as well as correlation of returns between the markets.