Effect of COVID-19 Pandemic on Global Stock Markets

20 Pages Posted: 2 Feb 2021 Last revised: 10 Mar 2021

See all articles by Bello Abba Ahmed

Bello Abba Ahmed

Department of Economics and Development Studies, Federal University Dutse, Nigeria

Murtala Abdu

Federal University Dutse - Department of Economics and Development Studies

Date Written: February 1, 2021

Abstract

This paper examined the effect of COVID-19 pandemic on global stock markets. Daily closing prices were obtained from Wall Street data base from 1st January to 31st March 2020. For the analysis 80 trading days were used from 20th January, 2020, when the news of COVID-19 pandemic broke out to 11th March, 2020 when WHO declared it a global pandemic. Eighteen stock indices from the most affected countries were selected for the study based on the reports of Worldometers and event study was used for the analysis. The CARs and CAARs for each stock index were computed based on regional classification using four windows of analysis. The regional classifications comprised Europe, America (North and South) and Asian stock indices. A two-way fixed effect model was estimated to test for the effect of regional volatility. The study discovered that the worst hit stock index with the lowest AR a day to the event was Spain’s IBEX 35 Index while on the event day the lowest was MSCI Poland Index. And the worst hit on the day after the event was S&P 500 Composite Index of the US. It further found that the COVID-19 pandemic affected each region in different ways. The North and South American stocks suffered the highest volatility, whereas, the highest losses were observed in European stocks. The study recommends that governments should be very mindful of the policy responses and measures they adopt to address the COVID-19 pandemic. Internal policies should be designed in such a way to accommodate for external shocks.

Keywords: COVID-19, pandemic, event study, stock market, stock volatility

JEL Classification: G21, G28, I11, I18

Suggested Citation

Abba Ahmed, Bello and Abdu, Murtala, Effect of COVID-19 Pandemic on Global Stock Markets (February 1, 2021). Available at SSRN: https://ssrn.com/abstract=3777104 or http://dx.doi.org/10.2139/ssrn.3777104

Bello Abba Ahmed (Contact Author)

Department of Economics and Development Studies, Federal University Dutse, Nigeria ( email )

Dutse, Jigawa 7156
Nigeria
+2348032327195 (Phone)

Murtala Abdu

Federal University Dutse - Department of Economics and Development Studies ( email )

Jigawa State
Nigeria

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