NEXUS OF COVID-19 NEWS WITH STOCK MARKET RETURNS AND VOLATILITY IN PAKISTAN

Waqas Shair, Sundas Naeem and Farhat Rasul
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Sundas Naeem: PHD Scholar, University of Bradford, Bradford, West Yorkshire, England

Bulletin of Business and Economics (BBE), 2021, vol. 10, issue 2, 92-99

Abstract: This study scrutinized the effect of fatality announcement and news of COVID-19 on stock market returns and volatility in Pakistan. The estimates of the EGARCH model unveiled that bad news related to COVID-19 news and fatality announcement decrease the stock returns. The findings specified that fatality ratio is associated with a decrease in stock market return and its one-day lag effect is stronger than the current day. Additionally, the bad news of the current day has a more negative effect on stock returns than its lag effect. The findings of the study confirm the presence of the leverage effect in the variance of stock returns. The further findings of the study divulged that the stock market of Pakistan is more volatile amid the period of the global pandemic to the recognition of the first case in Pakistan. The analysis confirmed that stock market of Pakistan is less volatile amid COVID-19 in Pakistan as it was before the global pandemic. The paper suggests that COVID-19 related news is an influential cognitive factor in describing the stock market returns and volatility. The proper disaster management can stable the position of the stock market and may provide better opportunities for investors to diversify financial risk.

Keywords: COVID-19; EGARCH model; Financial markets; Leverage effect; Stock returns (search for similar items in EconPapers)
JEL-codes: G01 G11 G14 G15 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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