Stock Market Reactions to COVID-19 Pandemic Outbreak: Quantitative Evidence from ARDL Bounds Tests and Granger Causality Analysis

Ştefan Gherghina, Daniel Ștefan Armeanu and Camelia Cătălina Joldeș
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Daniel Ștefan Armeanu: Department of Finance, Bucharest University of Economic Studies, 6 Piata Romana, 010374 Bucharest, Romania
Camelia Cătălina Joldeș: Department of Finance, Bucharest University of Economic Studies, 6 Piata Romana, 010374 Bucharest, Romania

IJERPH, 2020, vol. 17, issue 18, 1-35

Abstract: This paper examines the linkages in financial markets during coronavirus disease 2019 (COVID-19) pandemic outbreak. For this purpose, daily stock market returns were used over the period of December 31, 2019–April 20, 2020 for the following economies: USA, Spain, Italy, France, Germany, UK, China, and Romania. The study applied the autoregressive distributed lag (ARDL) model to explore whether the Romanian stock market is impacted by the crisis generated by novel coronavirus. Granger causality was employed to investigate the causalities among COVID-19 and stock market returns, as well as between pandemic measures and several commodities. The outcomes of the ARDL approach failed to find evidence towards the impact of Chinese COVID-19 records on the Romanian financial market, neither in the short-term, nor in the long-term. On the other hand, our quantitative approach reveals a negative effect of the new deaths’ cases from Italy on the 10-year Romanian bond yield both in the short-run and long-run. The econometric research provide evidence that Romanian 10-year government bond is more sensitive to the news related to COVID-19 than the index of the Bucharest Stock Exchange. Granger causality analysis reveals causal associations between selected stock market returns and Philadelphia Gold/Silver Index.

Keywords: COVID-19; stock market; ARDL model; Granger causality (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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