COVID-19, government interventions and emerging capital markets performance

David Y. Aharon and Smadar Siev

Research in International Business and Finance, 2021, vol. 58, issue C

Abstract: In this study, we explore the impact of government intervention to contain the spread of COVID-19 in emerging countries on the performance of their leading stock indices. We retrieved data on the performance of 25 international capital market indices included in the MSCI Emerging Markets Index and data about the closures, economic, and health measures imposed in each country examined. Overall, our findings show that government restrictions are associated with negative market returns, possibly due to the anticipated adverse effect to the economy. The adverse effect is more evident when closures are imposed. The market response to economic stimulus is mild but varies depending on the type of intervention imposed, much as with the health measures. Public campaigns may raise public awareness about COVID-19, but they can also increase the public’s fear of the pandemic, reflected in the negative response in capital markets. The results are essential for understanding the trends and fluctuations in emerging markets during this current crisis and for preparing for crises in the future.

Keywords: COVID-19; Abnormal returns; Emerging markets; Government restrictions; Government interventions; Institutional theory; Institutional voids; The supply of stock market returns hypothesis (search for similar items in EconPapers)
JEL-codes: G01 G12 G15 G18 H12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:58:y:2021:i:c:s0275531921001136

DOI: 10.1016/j.ribaf.2021.101492

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