Open AccessStock market performance and COVID-19 pandemic: evidence from a developing economy
Author(s) -
Michael Insaidoo,
Lilian Arthur,
Samuel Amoako,
Francis Kwaw Andoh
Publication year - 2021
Publication title -
journal of chinese economic and foreign trade studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.399
H-Index - 12
eISSN - 1754-4416
pISSN - 1754-4408
DOI - 10.1108/jcefts-08-2020-0055
Subject(s) - volatility (finance) , pandemic , economics , stock market , covid-19 , stock (firearms) , econometrics , financial economics , volatility clustering , heteroscedasticity , monetary economics , autoregressive conditional heteroskedasticity , geography , medicine , context (archaeology) , disease , archaeology , pathology , infectious disease (medical specialty)
Purpose The purpose of this study is to assess the extent to which the Ghana stock market performance has been impacted by the novel COVID-19 pandemic. Design/methodology/approach The study used the exponential generalized autoregressive conditional heteroscedasticity (EGARCH) model, by using daily time series data from 2 January 2015 to 13 October 2020. Both pre-estimation (Augmented Dickey-Fuller and Phillips-Perron) and post-estimation tests (Jarque-Bera) were conducted to validate the results. Findings While the study shows a statistically insignificant negative relationship between the COVID-19 pandemic and the Ghana stock returns, the results confirm that the COVID-19 pandemic has occasioned an increase in the Ghana stock returns volatility by 8.23%. Furthermore, the study confirmed the presence of volatility clustering and asymmetric effect, with the latter implying that worthy news tends to affect volatility more than unwelcome news of equal size. Practical implications To dampen uncertainties that trigger stock market volatility, the government should surgically target worse affected COVID-19 pandemic businesses and households to check the drop in profits and demand. Rigidities associated with stock market operations must be addressed to make it attractive to investors even in the midst of a pandemic. Originality/value This paper is a pioneer attempt at assessing the extent to which a developing economy stock market has been impacted by the novel COVID-19 pandemic using the EGARCH model.