Open AccessThe Early Impact of Government Financial Intervention Policies and Cultural Secrecy on Stock Market Returns During the COVID-19 Pandemic: Evidence From Developing Countries
Author(s) -
Fouad Jamaani,
Manal Alidarous,
Abdullah M. Al-Awadhi
Publication year - 2021
Publication title -
international journal of financial research
Language(s) - English
Resource type - Journals
eISSN - 1923-4031
pISSN - 1923-4023
DOI - 10.5430/ijfr.v12n2p401
Subject(s) - emerging markets , equity (law) , business , stock market , financial market , equity capital markets , developing country , economic interventionism , monetary economics , economics , financial system , finance , private equity , economic growth , paleontology , horse , politics , political science , law , biology
This paper examines the role of government financial intervention policies and cultural secrecy on equity market returns during the start of the COVID-19 pandemic in developing countries’ stock markets. We employ global data including 939 observations across 32 developing countries (23 emerging and 9 frontier stock markets) from December 1 to April 28, 2020. Our results show that the above-mentioned policies that set out to curb the COVID-19 pandemic succeed in increasing equity returns. It reflects investors’ improved perceptions of governments’ commitment to stabilizing the economy during the pandemic in developing, emerging, and frontier equity markets. Results show that investors in all equity markets discount differences in cultural secrecy in processing market information when investing in stock markets. We find that equity market investors in developing and emerging countries truly react negatively to the rise in the number of confirmed COVID-19 cases reported. Yet, we find that COVID-19 wields no influence on equity market returns in frontier equity markets. This presents frontier equity markets as a safe-haven investment destination during a global health outbreak. Our work helps investors during such events to identify the best and worst investment destinations in developing, emerging, and frontier stock markets. At the same time, it is important to understand the critical roles of: firstly, the introduced government financial intervention policies; and secondly, the daily growth in reported COVID-19 cases on stock market returns.