The role of Covid-19 for Chinese stock returns: evidence from a GARCHX model

Nicholas Apergis () and Emmanuel Apergis

Asia-Pacific Journal of Accounting & Economics, 2022, vol. 29, issue 5, 1175-1183

Abstract: This paper examines the effect of Covid-19 pandemic on the Chinese stock market returns and their volatility using the generalized autoregressive conditionally heteroskedastic GARCHX model. The GARCHX model allows us to include Covid-19 information within the GARCH framework. The findings document that daily increases in total confirmed Covid-19 cases in China, measured as total daily deaths and cases, have a significant negative impact on stock returns, with the negative impact of the Covid-19 on stock returns being more pronounced when total deaths proxy the effect of this infectious disease. The results also document that Covid-19 has a positive and statistically significant effect on the volatility of these market returns. Overall, new evidence is offered that infectious diseases, such as Covid-19, can seriously impact market returns, as well as their volatility. The findings could be essential in understanding the implications of Covid-19 for the stock market in China.

Date: 2022
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DOI: 10.1080/16081625.2020.1816185

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