The impact of COVID-19 on S&P500 sector indices and FATANG stocks volatility: An expanded APARCH model

José Dias Curto and Pedro Serrasqueiro

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: In this paper we hypothesize that not all stocks and sectors are affected equally by COVID-19 in terms of return volatility. Specifically, we hypothesize that at least some sectors (Information Technology, Consumer Discretionary, Telecom Services, Consumer Staples and Energy) must show statistically significant differences. We analyze eleven SP500 sectors and FATANG stocks, estimating an Asymmetric Power GARCH model including a dummy variable to account for the outbreak. Results reveal an exacerbation of volatility after February 2020 and validate our hypothesis with few exceptions. Based on a likelihood ratio test, the null hypothesis is rejected in most cases in favor of our APARCH(1, 1).

Keywords: APARCH; Heteroskedasticity; COVID-19; Leverage effect; FATANG; S&P500 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003020

DOI: 10.1016/j.frl.2021.102247

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