The Effects of COVID-19 on Chinese Stock Markets: An EGARCH Approach

21 Pages Posted: 28 May 2020

See all articles by Kerry Liu

Kerry Liu

The University of Sydney

Date Written: April 26, 2020

Abstract

The 2019 novel Coronavirus disease (COVID-19) has greatly affected the financial markets, economies and societies around the world. This study is the first of its kind that focuses on the Chinese stock markets. Based on Google Trends data during 1 January – 12 April, 2020 and by using the exponential generalized autoregressive conditional heteroskedastic (EGARCH) model, this study finds that the higher uncertainty resulting from the COVID-19 can cause the significant drop of China’s composite index, but this impact varies by sectors. At the same time, a higher uncertainty towards COVID-19 can cause bigger volatility of stock returns for both composite index and sector indices. Future studies can use data sets from other economies to see whether this pattern is consistent.

Keywords: Coronavirus; COVID-19; EGARCH; Volatility; Chinese stock markets; Pandemic

JEL Classification: E44; G01; Q43

Suggested Citation

Liu, Kerry, The Effects of COVID-19 on Chinese Stock Markets: An EGARCH Approach (April 26, 2020). Available at SSRN: https://ssrn.com/abstract=3612461 or http://dx.doi.org/10.2139/ssrn.3612461

Kerry Liu (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

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