Investigating the Effects of the COVID-19 Pandemic on Stock Volatility in Sub-Saharan Africa: Analysis Using Explainable Artificial Intelligence

Mbongiseni Ncube (), Mabutho Sibanda and Frank Ranganai Matenda
Additional contact information
Mbongiseni Ncube: School of Accounting, Economics and Finance, University of KwaZulu-Natal, Westville Campus, Durban 4041, South Africa
Mabutho Sibanda: School of Accounting, Economics and Finance, University of KwaZulu-Natal, Westville Campus, Durban 4041, South Africa
Frank Ranganai Matenda: School of Accounting, Economics and Finance, University of KwaZulu-Natal, Westville Campus, Durban 4041, South Africa

Economies, 2024, vol. 12, issue 5, 1-37

Abstract: This study examines the impact of the COVID-19 pandemic on sector volatility in sub-Saharan Africa by drawing evidence from two large and two small stock exchanges in the region. The analysis included stock-specific data, COVID-19 metrics, and macroeconomic indicators from January 2019 to July 2022. This study employs generalized autoregressive conditional heteroskedasticity (GARCH) models to estimate volatility and Explainable Artificial Intelligence (XAI) in the form of SHapley Additive exPlanations (SHAP) to identify significant factors driving stock volatility during the pandemic. The findings reveal significant volatility increases at the onset of the pandemic, with government stringency measures leading to increased volatility in larger exchanges, while the introduction of vaccination programs helped to reduce volatility. Weaker macroeconomic fundamentals impact volatility in smaller exchanges. The healthcare sector has emerged as the most resilient, while non-essential sectors, such as consumer discretionary, materials, and real estate, face greater vulnerability, especially in smaller exchanges. The research findings reveal that the heightened stock market volatility observed was mainly a result of the government’s actions to combat the spread of the pandemic, rather than its outbreak. We recommend that governments introduce sound policies to balance public health measures and economic stability, and that investors diversify their investments to reduce the impact of pandemics.

Keywords: COVID-19 pandemic; sub-Saharan Africa; stock market volatility; GARCH models; Explainable Artificial Intelligence (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7099/12/5/112/pdf (application/pdf)
https://www.mdpi.com/2227-7099/12/5/112/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:12:y:2024:i:5:p:112-:d:1390585

Access Statistics for this article

Economies is currently edited by Ms. Adore Zhou

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().