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The impact of the COVID 19 pandemic on stock market volatility: evidence from a selection of developed and emerging stock markets

Author

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  • Muhammad Niaz Khan

    (University of Science and Technology)

  • Suzanne G. M. Fifield

    (University of Dundee)

  • David M. Power

    (University of Dundee)

Abstract

This study examines the impact of the COVID 19 pandemic on the stock markets of China, India, Pakistan, the UK and the US using Generalised Autoregressive Conditional Heteroscedasticity (GARCH) and Threshold GARCH models with COVID 19 as an exogenous dummy variable in the variance equation. The sample period of 2016–2021 is divided into two sub-periods: the pre-COVID 19 period and the COVID 19 period. The results of the study indicate that there was persistent volatility in these markets and that this volatility increased as a result of the pandemic. In addition, the Threshold GARCH results indicate that the asymmetric term was significant in all markets indicating that bad news, such as the pandemic, had a stronger impact on the conditional variance of the returns as compared to good news. In addition, the results further confirm that the US market had no significant impact on the volatility of the Chinese market during the pandemic. The results have important implications for (1) international investors regarding portfolio management and investment risk minimisation in situations like the COVID 19 pandemic; and (2) policy-makers in terms of how they respond to any future pandemic.

Suggested Citation

  • Muhammad Niaz Khan & Suzanne G. M. Fifield & David M. Power, 2024. "The impact of the COVID 19 pandemic on stock market volatility: evidence from a selection of developed and emerging stock markets," SN Business & Economics, Springer, vol. 4(6), pages 1-26, June.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:6:d:10.1007_s43546-024-00659-w
    DOI: 10.1007/s43546-024-00659-w
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    More about this item

    Keywords

    Stock market volatility; COVID 19; GARCH;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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