COVID-19 pandemic and stability of stock market—A sectoral approach

Abstract

The COVID-19 pandemic seems to be the most important phenomenon observed from March 2020 in virtually all countries of the world. The necessity to prevent the spread of COVID-19 and keep health care systems efficient resulted in the forced, drastic limitation of economic activity. Many service sectors were hit particularly hard with this but industry and agriculture were also affected. In particular, the pandemic substantially influenced financial markets and we can observe that some markets or instruments vary in stability since they have been affected in the different degree. In the paper, we present the problem of stability of stock markets during the COVID-19 pandemic. Due to the low number of works related to CEE countries during the pandemic, we analyze the Warsaw Stock Exchange, which is one of the most important markets in the CEE. Our main goal was to find how various industries represented by stock market indices have reacted to the COVID-19 shock and consequently which sectors turned out to keep stability and remained resistant to the pandemic. In our investigation, we use two clustering methods: the K-means and the Ward techniques with the criterion of maximizing the silhouette coefficient and six indicators describing stability in terms of profitability, volume, overbought/oversold conditions and volatility. The results of the research present that during the pandemic it was possible to identify 5 clusters of sector indices in the short term and 4 in the medium term. We found that the composition of the clusters is quite stable over time and that none of the obtained clusters can be univocally considered the most or the least stable taking into account all the analyzed indicators. However, we showed that the obtained clusters have different stability origins, i.e. they vary from each other in terms of the investigated indicators of stability.

Cryptocurrency Market Consolidation in 2020–2021

“…) of the squared eigenvector components v Some deeper insight into the cross-correlation structure of the cryptocurrency market can be gained by transforming the q-dependent detrened correlation matrix C q (s) into a related distance matrix D q (s), whose elements are defined by Equation (7). The latter is used as a basis for creating a minimum spanning tree, in which each node represents a particular cryptocurrency and each weighted edge represent the metric distance between a pair of assets or, equivalently, the detrended cross-correlation coefficient.…”

“…Over the past few years, two processes have had a particularly strong impact on financial markets: the emergence of the cryptocurrency market [ 1 , 2 , 3 , 4 , 5 ] and the COVID-19 pandemic [ 6 , 7 , 8 , 9 , 10 , 11 , 12 ]. Each of these processes alone has already been a topic in numerous pieces of the scientific literature, but they also were studied together [ 5 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 ].…”

Decline in Share Prices of Energy and Fuel Companies on the Warsaw Stock Exchange as a Reaction to the COVID-19 Pandemic

“…Hence, it is difficult to compare the results of our study with those obtained by other authors and additionally related to the impact of COVID-19 on the energy and fuel sector. Buszko et al [76] in their research address the problem of stock market stability during the first wave of the COVID-19 pandemic. They analyse the Warsaw Stock Exchange.…”

COVID-19: A Game-changer to Equity Markets?

“…To further elucidate the equity market response to the COVID-19 issue, some empirical studies have focused on the market performance through its constituents, on a sector level [37][38]40]. For example, He et al [38] reported the manufacturing, information technology, education and health-care industries in China as being the most resilient sectors within the pandemic timeline; while the transportation, mining, electricity and environment industries are found to be the most vulnerable to the COVID-19 crisis, in the Chinese market.…”

“…Alam et al [40] inspected the sectoral performance of the Australian equity market in the immediate days following COVID-19 announcement and found a good performance for the telecommunications, pharmaceuticals and healthcare sectors, in this period. Buszko et al [37] analyzed the sector constituents of the Warsaw Stock Exchange during COVID-19 pandemic and found the construction, information technology, game developers, biotechnology, telecoms and new technology sectors to exhibit positive relative change in their average prices, in the medium-term period after the crisis began. While some other sectorsautomobiles, banking, chemical, clothes, energy, food, mining, oil & gas, pharmaceutical and real estate-were found unprofitable within the same timeline, in that market.…”