Has the COVID-19 Pandemic Led to a Switch in the Volatility of Biopharmaceutical Companies?

Adriana AnaMaria Davidescu (), Eduard Mihai Manta, Oana Mihaela Vacaru (Boita), Mihaela Gruiescu, Razvan Gabriel Hapau and Paul Laurentiu Baranga
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Adriana AnaMaria Davidescu: Department of Statistics and Econometrics, The Bucharest University of Economic Studies, 010552 Bucharest, Romania
Eduard Mihai Manta: Doctoral School of Cybernetics and Statistics, Bucharest University of Economic Studies, 010374 Bucharest, Romania
Oana Mihaela Vacaru (Boita): Doctoral School of Cybernetics and Statistics, Bucharest University of Economic Studies, 010374 Bucharest, Romania
Mihaela Gruiescu: Department of Informatics, Statistics and Mathematics, Romanian-American University, 012101 Bucharest, Romania
Razvan Gabriel Hapau: Doctoral School of Finance, Western University of Timisoara, 300223 Timisoara, Romania
Paul Laurentiu Baranga: Doctoral School of Economics II, Bucharest University of Economic Studies, 010374 Bucharest, Romania

Mathematics, 2023, vol. 11, issue 14, 1-24

Abstract: Biopharmaceutical companies are critical in developing vaccines, treatments, and diagnostics for COVID-19. Thus, understanding the contagion effects of their stock market can have important economic implications, especially in the context of global financial markets. Due to the COVID-19 pandemic, biopharmaceutical companies’ stock markets may have experienced sudden volatility and risk changes, which may have had spillover effects on other sectors and markets. Policymakers can take pre-emptive measures to stabilize financial markets. Analyzing the contagion effects makes it even more relevant to analyze the stock market response of four leading pharmaceutical companies that either developed vaccines against COVID-19 or drugs that help to fight the virus, namely, Pfizer, AbbVie Inc., Sanofi, and Bristol Myers Squibb. The analysis considers two periods, before and during the COVID-19 crisis, and considers the influence of the market volatility and technological market index. In order to capture the contagion effects, DCC-GARCH models have been applied, which estimate time-varying correlation coefficients using a multivariate GARCH framework, allowing for the modeling of time-varying volatility and correlations in financial returns. The results reveal the impact of market volatility on the returns of all four pharmaceutical companies. Additionally, a contagion effect between all four companies, the technological market, and market volatility was observed during the COVID-19 period.

Keywords: sustainable development; DCC-GARCH; contagion effect; biopharmaceutical market; COVID-19; volatility (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
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