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The impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model

Marwan Izzeldin, Yaz Muradoglu (), Vasileios Pappas and Sheeja Sivaprasad

International Review of Financial Analysis, 2021, vol. 74, issue C

Abstract: We investigate the impact of Covid-19 on stock markets across G7 countries and their business sectors. We highlight the synchronicity and severity of this unprecedented crisis. We find strong transition evidence to a crisis regime in all countries and sectors, yet crisis intensity and timings vary. The Health Care and Consumer services sectors were the most severely affected; a reflection of the Covid-19 drug-race and international travel restrictions. The Technology sector was hit the latest and least severely, as imposed lockdown measures forced people to explore various web-based entertainment and distraction options. Country-wise the UK and the US were the most affected with the highest heterogeneity in their business sectors' response; a possible reflection of the ambiguity in the initial response and adoption of lockdown measures. Financial markets' response to Covid-19 is akin to response in previous financial crisis rather than previous pandemics. A series of robustness checks confirms our findings.

Keywords: Covid-19; Financial markets; HAR model; Smooth transition; Business sectors (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.irfa.2021.101671

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