Economics at your fingertips  

Market volatility and illiquidity during the COVID-19 outbreak: Evidence from the Saudi stock exchange through the wavelet coherence approaches

Kais Tissaoui, Besma Hkiri, Mariem Talbi, Waleed Alghassab and Khaled Issa Alfreahat

The North American Journal of Economics and Finance, 2021, vol. 58, issue C

Abstract: The aim of this paper is to examine the explanatory power of realized volatility on the illiquidity in Saudi stock market during the COVID-19outbreak. To achieve this objective, we consider the Wavelet Coherence approaches as empirical tools to investigate the combined effect of realized volatility and COVID-19 counts on the market illiquidity across frequencies and over time space by taking in account the number of infected cases in Saudi Arabia and over the World, and the number of death cases in Saudi Arabia as well as over the World. Our study reaches two main findings. First, the preliminary results reported by the ARDL bound test as a benchmark model showed significant long-run and short-run effects of the market volatility on illiquidity in contemporaneous and lagged manner. Second, the wavelet coherence analysis tools exhibited important results: (i) the wavelet coherency between illiquidity ratio and realized volatility in Saudi Arabia appear highly pronounced over all time horizons. (ii) PWC plots showed a significant mutual effect between liquidity risk and realized volatility when eliminating the effect of local COVID-19 cases. (iii) MWC plots highlighted that the response of the market illiquidity index to both the amplification in confirmed local cases (resp. international confirmed cases) and the stock market volatility appear significant in the short and middle horizons.

Keywords: Market illiquidity; Market volatility; COVID-19 outbreak; Wavelet coherence approaches; ARDL bound test; Saudi Stock Market (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

DOI: 10.1016/j.najef.2021.101521

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2024-02-12
Handle: RePEc:eee:ecofin:v:58:y:2021:i:c:s1062940821001376