Responses of stock market volatility to COVID-19 government interventions: evidence from Asian emerging stock markets

Noureddine Benlagha and Wael Hemrit

Review of Behavioral Finance, 2025, vol. 17, issue 2, 342-364

Abstract: Purpose - The study aimed to examine the impact of COVID-19-related governments’ interventions on the volatility in stock returns in several Asian countries following the COVID-19 outbreak. Design/methodology/approach - Using a battery of conditional volatility models, we first investigate the dynamic behavior of the stock return volatility for selected Asian stock markets during the pandemic period. Second, we wish to find out how these volatilities overlap with a wide range of governments’ interventions related to COVID-19 and whether a relationship can be established between two types of uncertainty and the volatility of the considered stock returns. Findings - We confirm an asymmetric pattern in the volatility of selected Asian stock markets. In addition, the result shows that the effects of governments’ interventions vary significantly across countries. The “Containment and Health” and “Economic Support” indices appear to have a significant and negative impact on the volatility of the overwhelming majority of stock markets. Further, all Asian stock markets are experiencing a significant positive effect of “Stringency measures” on the return volatilities. Originality/value - This research could have implications for investors and policymakers in terms of portfolio diversification to maintain active and gainful investment strategies during the pandemic crisis.

Keywords: Emerging markets; COVID-19 pandemic; Government policy responses stringency index; Uncertainty; G11; C32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-05-2024-0124

DOI: 10.1108/RBF-05-2024-0124

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