The World Health Organization (WHO) has designated the new coronavirus infection as a global pandemic, based on the risk of contagion, and the number of confirmed cases in more than 195 countries. COVID-19 has an intense impact on the global economy, resulting from uncertainty and pessimism, with adverse effects on financial markets. Due to these events, this essay aims to estimate if the portfolio’s diversification is feasible in the financial markets of Indonesia, Malaysia, Philippines, Singapore, and Thailand (ASEAN-5), in the context of the global pandemic (Covid-19), regarding the period of July 1, 2019, to July 22, 2020. To achieve such an analysis, is intended to provide answers for two questions, namely: i) the global pandemic (Covid-19) has accentuated financial integration between the ASEAN-5 markets? ii) If so, can the persistence of returns affect the risk diversification of portfolios? The results obtained suggest that those regional markets present accentuated levels of integration. However, the Singapore's stock market index does not show any level of integration, indicating that the implementation of portfolio’s diversification strategies can be considered; however, the same can no longer be evident for the other ASEAN-5 markets. Additionally, we verified that the ASEAN-5 markets indicate persistence in returns, that is, the presence of accentuated long memories, except for the Singapore market (SGX). These findings show that prices do not fully reflect the information available and that changes in prices are not independent and identically distributed. This situation is found for investors, since some returns can be expected, creating opportunities for arbitrage and abnormal earnings. Corroborating the trendless cross-correlation coefficients (𝜆𝐷𝐶𝐶𝐴), proven evidence coefficients, mostly, suggest the existence of risk transmission between markets. In conclusion, the authors seek that the implementation of an efficient diversification strategy for portfolios requires agreement with the controversial application. These conclusions also open space for the regulators of these regional markets to take measures to ensure better information between these markets and international markets.
The COVID-19 outbreak caused several concerns all over the world. On January 30, 2020, the World Health Organization (WHO) declared it a global health emergency. This outbreak leads to a drastic change in people's lifestyles, causing lots of job losses all over the world and threaten the livelihood of millions of people since the firms closed to avoid virus propagation. In general, all economic activities were interrupted, and the stock markets had significant breaks. Due to these events, this essay pretends to analyse the efficiency, in its weak form, in the stock market indexes of France (CAC40), China (SSEC), South Korea (KOSPI), Germany (DAX 30), Italy (FTSE MID), Portugal (PSI 20), and Spain (IBEX 35), in the period of December 31, 2019, to August 10, 2020. To accomplish this research, different approaches were taken to analyse whether: (i) the countries affected by the global pandemic (COVID-19) caused (in) efficiency in their stock markets? The results suggest that the hypothesis of random walk in all the markets under study was rejected. Variance ratios' values are, in all cases, lower than the unity, which implies that the returns are auto correlated over time, and there is a reversion to the mean, in all indexes. The exponents Detrended Fluctuation Analysis (DFA), indicate significant long memories, i.e. they validate the results of the non-parametric test of Wright (2000), which comprises two types of tests, the Position test (Rankings) for homoscedastic series, and the Signal test for heteroscedastic series. These findings show that prices do not fully reflect the information available and that changes in prices are not independent and identically distributed. This situation has implications for investors since some returns can be expectable, creating opportunities for arbitrage and abnormal earnings. These conclusions also open space for market regulators to take measures to ensure better information in these regional markets.
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