Description
Title: Stock Market Responses During Different COVID-19 Pandemic Phases: Italy and Spain Case Studies
Abstract: It is inevitable that the COVID-19 pandemic and the lockdowns and quarantine centers it caused have had an impact on people, companies, and governments. The COVID-19 pandemic’s global spread also had a significant impact on financial markets around the world and increased levels of uncertainty, and stock markets were no exception. The majority of studies on the COVID-19 pandemic’s effects on stock markets are based either on the analysis of a relatively brief period (the beginning of the pandemic) or a longer period, both of which are extremely heterogeneous in terms of the information on the COVID-19 virus that was available and the actions that were taken to contain the virus and deal with the pandemic’s effects. Although studies of this kind are still in their infancy, it is crucial to evaluate the impact not only at the start of the pandemic but also in the following periods and to compare the nature of this impact. Therefore, the purpose of this study is to examine how the COVID-19 pandemic has affected the stock markets of Italy and Spain, two of the most severely affected European nations. OLS regression models, heteroscedasticity-corrected models, GARCH (1,1) models, and VAR-based impulse response functions are all used to achieve the research’s goal. The findings show that, depending on the nation and time period considered, the stock market’s response to the COVID-19 pandemic varies: In contrast to impulse response functions, which showed that the analyzed markets had a non-zero primary response to the COVID-19 shock, and GARCH models (in the case of Spain), which confirmed that the COVID-19 pandemic increased the volatility of stock market return, OLS regression and heteroscedasticity-corrected models have not revealed the statistically significant impact of the spread of the COVID-19 pandemic. This study adds to the body of knowledge by offering a thorough evaluation of the impact on both the pandemic’s overall pre-vaccination period and its various phases.
Keywords: COVID-19 pandemic; stock market; stock index; market volatility; impulse response functions; GARCH (1,1) model
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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