Stock Market Liquidity, the Great Lockdown and the COVID-19 Global Pandemic Nexus in MENA Countries
Posted: 2 Jun 2020
Date Written: June 1, 2020
The global pandemic of coronavirus has created an unprecedented economic lockdown. Although past pandemics have caused a short run market shock with quick recovery, this pandemic is believed to last as some sectors are deemed to disappear or change. Accordingly, this paper investigates the impact of the global Coronavirus (COVID-19) pandemic on stock market liquidity taking into account the depth and tightness dimension. We used a panel stock market data set representing 320 listed firms operating in six MENA countries from February to May 2020. The regression results on the overall sample indicates that liquidity using both depth and tightness measures is positively correlated to confirmed cases growth and death growth respectively. In addition to that, the stringency index is positively related to both liquidity measures. Our results also indicate that small cap firms’ liquidity is significantly impacted by the confirmed number of cases and death. Results were not statistically significant for big cap firms. Moreover, all industry sectors’ liquidity was significantly impacted by the growing confirmed cases except for the healthcare sector whose results were not significant. Hence, this paper confirmed that the global pandemic of coronavirus has decreased the stock market liquidity in both its depth and tightness dimension.
Keywords: Coronavirus, stock market, liquidity, MENA
JEL Classification: G01, G40, G41
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