Understanding the effects of COVID-19 on regime switching behaviour of Asian stock markets

Bhaskar Bagchi and Raktim Ghosh

International Journal of Monetary Economics and Finance, 2023, vol. 16, issue 5, 397-416

Abstract: The present work aims to study the regime-switching behaviour of stock indices of Asian emerging economies namely China, India, South Korea, Indonesia, Hong Kong, and Thailand that have been caused due to outbreak of the COVID-19 pandemic. The Markov Regime-Switching model identifies the switching over of the variables from one regime to another. The break-point unit root test confirms the non-existence of unit root along with the identification of structural breaks. Johansen Co-integration test and Wald test are applied to ascertain the long-run and short-run relationship. The findings from the Johansen Co-integration test and Wald test verify the existence of the associations. The Markov Switching model signifies the switching over of all the select stock indices from regime 1 to regime 2 and the magnitude of volatility in regime 2 is much more than that of regime 1.

Keywords: COVID-19; stock markets; Asian economies; Markov regime-switching model; Co-integration; Wald test; break-point unit root test. (search for similar items in EconPapers)
Date: 2023
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