IDEAS home Printed from https://ideas.repec.org/a/rbs/ijbrss/v10y2021i7p199-219.html
   My bibliography  Save this article

Investigating the impact of Covid-19 pandemic on stock markets:Evidence from global equity indices

Author

Listed:
  • Mustapher Faque

    (Financial Economics, Gradutate School of Business, Ibn Haldun University, Istanbul, Turkey)

  • Umit Hacioglu

    (Professor of Applied Finance & Business Strategy, School of Business, Ibn Haldun University, Istanbul, Turkey)

Abstract

This paper aims to examine the impact of Covid-19 pandemic on stock markets. This paper also analyses the stock market cointegration of selected global equity indices that performed better and have a quick speed of recovery during the pandemic. This paper also questions how increasing uncertainty and volatility deters investors’ perception of the diversification of equity investments. The dataset for the selected 12 global equity indices has been used from Thompson Reuters’s EIKON database in a given period of time between 2010 and 2021. This paper employs Vector Error Correction Models to assess the relationship among the selected global equity indices. Findings demonstrate that (i) there is an adverse impact of Covid-19 on the Global Equity markets, (ii) there is a clear sign of cointegration in global equity indices, (ii) investors can benefit from investing in particular equity indices that have exhibited quick speed of recovery from the pandemic records lows. The findings finally provide a strong foundation for constructing a resilient equity portfolio in a highly uncertain market environment. Key Words:Covid-19, Cointegration, Diversification, Global Equity Indices, Pandemic

Suggested Citation

  • Mustapher Faque & Umit Hacioglu, 2021. "Investigating the impact of Covid-19 pandemic on stock markets:Evidence from global equity indices," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(7), pages 199-219, October.
    • Handle: RePEc:rbs:ijbrss:v:10:y:2021:i:7:p:199-219
    DOI: 10.20525/ijrbs.v10i7.1461
    as

    Download full text from publisher

    File URL: https://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/1461/1050
    Download Restriction: no
    File URL: https://doi.org/10.20525/ijrbs.v10i7.1461
    Download Restriction: no
    File URL: https://libkey.io/10.20525/ijrbs.v10i7.1461?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Baek, Seungho & Mohanty, Sunil K. & Glambosky, Mina, 2020. "COVID-19 and stock market volatility: An industry level analysis," Finance Research Letters, Elsevier, vol. 37(C).
    2. R C Royfaizal & C Lee & M Azali, 2009. "The Linkages of Asian and the US Stock Markets," The IUP Journal of Financial Economics, IUP Publications, vol. 0(2), pages 74-90, June.
    3. Kim, Bong-Han & Kim, Hyeongwoo & Lee, Bong-Soo, 2015. "Spillover effects of the U.S. financial crisis on financial markets in emerging Asian countries," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 192-210.
    4. Fu Qiao & Yan Yan, 2020. "A Demand-Oriented Industry-Specific Volatility Spillover Network Analysis of China’s Stock Market around the Outbreak of COVID-19," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(11), pages 1321-1341, November.
    5. Hotvedt, James E. & Tedder, Philip L., 1978. "Systematic And Unsystematic Risk Of Rates Of Return Associated With Selected Forest Products Companies," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 10(01), pages 1-4, July.
    6. Merton H. Miller, 2024. "Financial markets and economic growth," Journal of Applied Corporate Finance, Morgan Stanley, vol. 36(1), pages 9-14, January.
    7. Syriopoulos, Theodore, 2007. "Dynamic linkages between emerging European and developed stock markets: Has the EMU any impact?," International Review of Financial Analysis, Elsevier, vol. 16(1), pages 41-60.
    8. Marco Pagano & Ailsa A. Röell & Josef Zechner, 2002. "The Geography of Equity Listing: Why Do Companies List Abroad?," Journal of Finance, American Finance Association, vol. 57(6), pages 2651-2694, December.
    9. Mr. Ray Yeu-Tien Chou & Mr. Victor Ng & Lynn K. Pi, 1994. "Cointegration of International Stock Market Indices," IMF Working Papers 1994/094, International Monetary Fund.
    10. Wang, Gang-Jin & Xie, Chi & Jiang, Zhi-Qiang & Stanley, H. Eugene, 2016. "Extreme risk spillover effects in world gold markets and the global financial crisis," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 55-77.
    11. Benos, Evangelos & Weisbach, Michael S., 2004. "Private benefits and cross-listings in the United States," Emerging Markets Review, Elsevier, vol. 5(2), pages 217-240, June.
    12. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
    13. Hotvedt, James E. & Tedder, Philip L., 1978. "Systematic and Unsystematic Risk of Rates of Return Associated with Selected Forest Products Companies," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 10(1), pages 135-138, July.
    14. Koutmos, Gregory, 1997. "Do emerging and developed stock markets behave alike? Evidence from six pacific basin stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 7(3), pages 221-234, October.
    15. Kasibhatla, Krishna & Stewart, David & Sen, Swapan & Malindretos, John, 2006. "Are equity market daily price indices and returns in the major european markets european markets cointegrated? Tests and evidence," MPRA Paper 36502, University Library of Munich, Germany.
    16. Léonce Ndikumana, 2001. "Financial Markets and Economic Development in Africa," Working Papers wp17, Political Economy Research Institute, University of Massachusetts at Amherst.
    17. Susan Chaplinsky & Latha Ramchand, 2000. "The Impact of Global Equity Offerings," Journal of Finance, American Finance Association, vol. 55(6), pages 2767-2789, December.
    18. Oladapo Fapetu & Olufemi Aluko, 2017. "The Linkage between Emerging and Developed Markets: Implication for International Portfolio Diversification," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(6), pages 313-322, DECEMBER.
    19. Baele, Lieven, 2005. "Volatility Spillover Effects in European Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(2), pages 373-401, June.
    20. Rudy Rahmaddi & Masaru Ichihashi, 2011. "How Do Foreign and Domestic Demand Affect Exports Performance? An Econometric Investigation of Indonesia's Exports," IDEC DP2 Series 1-4, Hiroshima University, Graduate School for International Development and Cooperation (IDEC), revised Jan 2012.
    21. Bekiros, Stelios D., 2014. "Contagion, decoupling and the spillover effects of the US financial crisis: Evidence from the BRIC markets," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 58-69.
    22. Franck Bancel & Cusha Mittoo, 2001. "European Managerial Perceptions of the Net Benefits of Foreign Stock Listings," European Financial Management, European Financial Management Association, vol. 7(2), pages 213-236, June.
    23. Fu Qiao & Yan Yan, 2020. "A Demand-Oriented Industry-Specific Volatility Spillover Network Analysis of China’s Stock Market around the Outbreak of COVID-19," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(11), pages 1321-1341.
    24. Scott R. Baker & Nicholas Bloom & Steven J. Davis & Kyle J. Kost & Marco C. Sammon & Tasaneeya Viratyosin, 2020. "The Unprecedented Stock Market Impact of COVID-19," NBER Working Papers 26945, National Bureau of Economic Research, Inc.
    25. Dimpfl, Thomas, 2014. "A note on cointegration of international stock market indices," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 10-16.
    26. Christian Jochum & Gebhard Kirchgässner & Mariusz Platek, 1999. "A long-run relationship between Eastern European stock markets? Cointegration and the 1997/98 crisis in emerging markets," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(3), pages 454-479, September.
    27. Jae-Kwang Hwang, 2014. "Spillover Effects of the 2008 Financial Crisis in Latin America Stock Markets," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(3), pages 311-324, August.
    28. Jian Yang & Moosa M. Khan & Lucille Pointer, 2003. "Increasing Integration Between the United States and Other International Stock Markets? : A Recursive Cointegration Analysis," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 39(6), pages 39-53, November.
    29. Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Kang, Sang Hoon, 2016. "Global financial crisis and spillover effects among the U.S. and BRICS stock markets," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 257-276.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ismail Mehmeti & Sokol Krasniqi, 2022. "Economic trends in times of pandemics: Kosovo case," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 4(1), pages 77-86, January.
    2. Nanang Suryadi & Rila Anggraeni & Dandi Ariyanto & Muhammad Fajrul Islam, 2021. "The effect of the COVID-19 pandemic on consumer behaviors: A study on gen-z in Indonesia," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(8), pages 313-318, December.
    3. Mustapher Faque, 2021. "Cash management strategies and firm financial performance: A comprehensive literature review," Bussecon Review of Social Sciences (2687-2285), Bussecon International Academy, vol. 3(4), pages 23-30, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karolyi, G. Andrew, 2012. "Corporate governance, agency problems and international cross-listings: A defense of the bonding hypothesis," Emerging Markets Review, Elsevier, vol. 13(4), pages 516-547.
    2. Roni Bhowmik & Abbas Ghulam & Wang Shouyang, 2018. "Return and Volatility Spillovers Effects: Study of Asian Emerging Stock Markets," Journal of Systems Science and Information, De Gruyter, vol. 6(2), pages 97-119, April.
    3. Claessens, Stijn & Schmukler, Sergio L., 2007. "International financial integration through equity markets: Which firms from which countries go global?," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 788-813, September.
    4. Sarkissian, Sergei & Schill, Michael J., 2012. "The nature of the foreign listing premium: A cross-country examination," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2494-2511.
    5. Sarkissian, Sergei & Schill, Michael, 2010. "Why are U.S. firms listed in foreign markets worth more?," MPRA Paper 27543, University Library of Munich, Germany.
    6. Corbet, Shaen & Hou, Yang (Greg) & Hu, Yang & Oxley, Les & Xu, Danyang, 2021. "Pandemic-related financial market volatility spillovers: Evidence from the Chinese COVID-19 epicentre," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 55-81.
    7. Harjoto, Maretno Agus & Rossi, Fabrizio & Lee, Robert & Sergi, Bruno S., 2021. "How do equity markets react to COVID-19? Evidence from emerging and developed countries," Journal of Economics and Business, Elsevier, vol. 115(C).
    8. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2012. "Financing of firms in developing countries : lessons from research," Policy Research Working Paper Series 6036, The World Bank.
    9. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2008. "Internationalization and the evolution of corporate valuation," Journal of Financial Economics, Elsevier, vol. 88(3), pages 607-632, June.
    10. Craig Doidge & G. Andrew Karolyi & Karl V. Lins & Darius P. Miller & René M. Stulz, 2009. "Private Benefits of Control, Ownership, and the Cross‐listing Decision," Journal of Finance, American Finance Association, vol. 64(1), pages 425-466, February.
    11. Tsuji, Chikashi, 2020. "Correlation and spillover effects between the US and international banking sectors: New evidence and implications for risk management," International Review of Financial Analysis, Elsevier, vol. 70(C).
    12. Cesario Mateus & Miramir Bagirov & Irina Mateus, 2024. "Return and volatility connectedness and net directional patterns in spillover transmissions: East and Southeast Asian equity markets," International Review of Finance, International Review of Finance Ltd., vol. 24(1), pages 83-103, March.
    13. Craig Doidge & G. Andrew Karolyi & Rene M. Stulz, 2007. "Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices Over Time," NBER Working Papers 13079, National Bureau of Economic Research, Inc.
    14. Mejda Bahlous, 2013. "Does Cross-Listing Benefit the Shareholders? Evidence from Companies in the GCC Countries?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 20(4), pages 345-381, November.
    15. Lail, Bradley E., 2014. "Do cross-listers bond to U.S. markets? An examination of earnings quality around SOX," Advances in accounting, Elsevier, vol. 30(2), pages 354-366.
    16. Imran Yousaf & Shoaib Ali & Wing-Keung Wong, 2020. "Return and Volatility Transmission between World-Leading and Latin American Stock Markets: Portfolio Implications," JRFM, MDPI, vol. 13(7), pages 1-19, July.
    17. Sarkissian, Sergei & Schill, Michael J., 2004. "Are There Permanent Valuation Gains to Overseas Listing? Evidence from Market Sequencing and Selection," Working Papers 05-4, University of Pennsylvania, Wharton School, Weiss Center.
    18. Jyh-Dean Hwang, 2013. "Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 137-163, December.
    19. Jyh-Dean Hwang, 2013. "Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 137-163, December.
    20. Joyce Hsieh & Chien-Chung Nieh, 2010. "An overview of Asian equity markets," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 24(2), pages 19-51, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbs:ijbrss:v:10:y:2021:i:7:p:199-219. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Umit Hacioglu (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.