COVID-19 and Stock Market Liquidity: An International Evidence

29 Pages Posted: 16 Feb 2021

See all articles by Muhammad Umar

Muhammad Umar

School of Economics and Management, East China Jiaotong University

Ghulame Rubbaniy

Zayed University - College of Business

Syed Kumail Abbas Rizvi

Lahore School of Economics; Université Paris 1 (Panthéon-Sorbonne)

Date Written: February 14, 2021

Abstract

This study analyzes the impact of COVID-19 on stock market liquidity of China and four worst hit countries by the pandemic. Using daily data for the stock market illiquidity spanning over July 1, 2019 to July 10, 2020 and the data for new cases and deaths over the period from December 31, 2019 to July 10, 2020, the results of our GARCH analysis show that liquidity in stock markets of all the sampled countries hit hard by the news of the outbreak. We find that for all sampled countries inflation in illiquidity due to temporary shocks reverts to long term trend shortly suggesting that the liquidity shocks due to the incidence of COVID-19were short lived. The findings of our VAR analysis show an absence of any short-term relationship between COVID-19 new cases or deaths and illiquidity. Since the series are not integrated at same level, long-term relationship between COVID-19 and stock market illiquidity do not exist as well suggesting no evidence of the effect of COVID-19 on stock market liquidity.

Keywords: COVID-19, Stock market, liquidity

JEL Classification: G10, G01, I15

Suggested Citation

Umar, Muhammad and Rubbaniy, Ghulame and Rizvi, Syed Kumail Abbas, COVID-19 and Stock Market Liquidity: An International Evidence (February 14, 2021). Available at SSRN: https://ssrn.com/abstract=3785590 or http://dx.doi.org/10.2139/ssrn.3785590

Muhammad Umar (Contact Author)

School of Economics and Management, East China Jiaotong University ( email )

Chengbei Development District
Nanchang, Jiangxi 330013
China
+8615970457020, +923354506802 (Phone)
330013 (Fax)

Ghulame Rubbaniy

Zayed University - College of Business ( email )

Zayed University
P.O. Box 144534
Abu Dhabi
United Arab Emirates

Syed Kumail Abbas Rizvi

Lahore School of Economics ( email )

Intersection Main Boulevard
Phase VI DHA and Burki Road
Burki, Lahore 54000
Pakistan

Université Paris 1 (Panthéon-Sorbonne) ( email )

Paris, IL

HOME PAGE: http://www.univ-paris1.fr/recherche/pages-enseignants-chercheurs/page/?uid=e0g411g00pb

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