Analyzing airlines stock price volatility during COVID‐19 pandemic through internet search data

Recent Coronavirus pandemic has prompted many regulations which are affecting the stock market. Especially because of lockdown policies across the world, the airlines industry is suffering. We analyse the stock price movements of three major airlines companies using a new approach which leverages a measure of internet concern on different topics. In this approach, Twitter data and Google Trends are used to create a set of predictors which then leads to an appropriately modified GARCH model. In the analysis, first we show that the ongoing pandemic has an unprecedented severe effect. Then, the proposed model is used to analyse and forecast stock price volatility of the airlines companies. The findings establish that our approach can successfully use the effects of internet concern for different topics on the movement of stock price index and provide good forecasting accuracy. Model confidence set (MCS) procedure further shows that the short‐term volatility forecasts are more accurate for this method than other candidate models. Thus, it can be used to understand the stock market during a pandemic in a better way. Further, the proposed approach is attractive and flexible, and can be extended to other related problems as well.