COVID-19 and Stock Market Volatility in South Africa: A Cross-Sector Analysis

Edson Vengesai ()

Asian Economic and Financial Review, 2022, vol. 12, issue 7, 473-493

Abstract: The COVID-19 pandemic has created enormous economic and market uncertainty in the global economy. However, businesses and industries weren’t affected homogeneously; whilst others suffered, some blossomed. Equity markets were not spared from the detrimental effects of the pandemic. This study investigates the impact of COVID-19 on stock returns’ conditional volatility in different South African stock market sectors using standard symmetrical and asymmetrical GARCH models. The MDCC-GARCH model was employed to understand the dynamics of conditional correlations between the leading indices. The results suggest that COVID-19 has increased return volatility for the majority of the sectors; however, the sectors weren’t affected in the same way. The DCC-GARCH model shows significant, high, positive correlations between the major and Small Cap indices, suggesting insignificant diversification benefits during the pandemic. The alternative exchange (ALTX) was found to have declining correlations with the main sectors, indicating an increase in diversification benefits offered by the ALTX following the pandemic shock.

Keywords: COVID-19; Return volatility; GARCH; FIGARCH; DCC GARCH; Stock market. (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.aessweb.com/index.php/5002/article/view/4533/7035 (application/pdf)
https://archive.aessweb.com/index.php/5002/article/view/4533/7608 (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:asi:aeafrj:v:12:y:2022:i:7:p:473-493:id:4533

Access Statistics for this article

More articles in Asian Economic and Financial Review from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().