Volatility in International Stock Markets: An Empirical Study during COVID-19

Rashmi Chaudhary, Priti Bakhshi and Hemendra Gupta
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Rashmi Chaudhary: Department of Finance, Jaipuria Institute of Management, Lucknow 226010, India
Priti Bakhshi: Department of Finance and Banking, Jaipuria Institute of Management, Indore 453771, India
Hemendra Gupta: Department of Finance, Jaipuria Institute of Management, Lucknow 226010, India

JRFM, 2020, vol. 13, issue 9, 1-17

Abstract: Predicting volatility is a must in the finance domain. Estimations of volatility, along with the central tendency, permit us to evaluate the chances of getting a particular result. Financial analysts are frequently challenged with the assignment of diversifying assets in order to form efficient portfolios with a higher risk to reward ratio. The objective of this research is to analyze the influence of COVID-19 on the return and volatility of the stock market indices of the top 10 countries based on GDP using a widely applied econometric model—generalized autoregressive conditional heteroscedasticity (GARCH). For this purpose, the daily returns of market indices from January 2019 to June 2020 were taken into consideration. The results reveal daily negative mean returns for all market indices during the COVID period (January 2020 to June 2020). Though the second quarter of the COVID period reflects a bounce back for all market indices with altered strengths, the volatility remains higher than in normal periods, signaling a bearish tendency in the market. The COVID variable, as an exogenous variance regressor in GARCH modeling, is found to be positive and significant for all market indices. Furthermore, the results confirmed the mean-reverting process for all market indices.

Keywords: volatility; GARCH; stock market; risk; crisis; coronavirus; GDP (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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