Pandemics and the emerging stock markets | Zendy

Afees A. Salisu | Zendy; Abdulsalam Abidemi Sikiru | Zendy; Xuan Vinh Vo | Zendy

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Pandemics and the emerging stock markets

Author(s) -

Afees A. Salisu,

Abdulsalam Abidemi Sikiru,

Xuan Vinh Vo

Publication year - 2020

Publication title -

borsa istanbul review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.682

H-Index - 21

eISSN - 2214-8469

pISSN - 2214-8450

DOI - 10.1016/j.bir.2020.11.004

Subject(s) - pandemic , predictability , emerging markets , stock (firearms) , financial economics , economics , stock market , covid-19 , equity (law) , stock market index , business , monetary economics , econometrics , finance , geography , statistics , medicine , context (archaeology) , mathematics , disease , archaeology , pathology , political science , infectious disease (medical specialty) , law

In this study, we examine the response of emerging stock markets due to the uncertainty of pandemics and epidemics (UPE), including the COVID-19 pandemic. We demonstrate this by evaluating the stock return predictability of 24 emerging market stocks using the new datasets on uncertainty due to pandemics as well as the global fear index for the COVID-19 pandemic. We partition the data sample into periods before and after the announcement of the COVID-19 pandemic and employ panel data techniques that account for salient features of both the series and predictive model. We found that emerging stock markets are more vulnerable to UPE than developed market stocks. Put differently, developed stock markets provide a better hedge against UPE than emerging stock markets. We also find that incorporating the UPE indicator in the valuation of stocks, particularly during pandemics, is crucial for investment decisions.

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