Predicting Stock Returns and Volatility in BRICS Countries during a Pandemic: Evidence from the Novel Wild Bootstrap Likelihood Ratio Approach

Oktay Özkan, Godwin Olasehinde-Williams and Ifedola Olanipekun
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Oktay Özkan: Department of Business Administration, Faculty of Economics and Administrative Sciences, Tokat Gaziosmanpasa University, Tokat, Turkey
Ifedola Olanipekun: Adeyemi College of Education, Ondo, Nigeria

Czech Journal of Economics and Finance (Finance a uver), 2022, vol. 72, issue 2, 124-149

Abstract: In this study, we examine how attention to different pandemics leads returns and volatility of BRICS stock markets, while controlling for economic policy uncertainty. The attention is measured via the newly developed daily infectious disease equity market volatility tracker (EMV-ID). To achieve the study objective, the wild bootstrap likelihood ratio test is employed in analysing time-series data covering the period November 1997 – May 2021. The estimations confirm a time-varying predictive performance of the EMV-ID on both stock returns and volatility series of BRICS, which increases significantly during the months marked by pandemics. The predictive power of the EMV-ID on stock market volatility is however relatively stronger than its predictive power on stock market returns. Our results are robust to alternative specification of volatility based on a Generalized Autoregressive Conditional Heteroskedasticity model.

Keywords: pandemics; the wild bootstrap likelihood ratio test; BRICS; stock market returns; stock market volatility (search for similar items in EconPapers)
JEL-codes: C32 D53 G12 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:72:y:2022:i:1:p:124-149

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