Idiosyncratic and Systematic Shocks of COVID-19 Pandemic on Financial Markets

Naidenova, Iuliia; Parshakov, Petr; Shakina, Elena

doi:10.2139/ssrn.3574774

Cited by 9 publications

(10 citation statements)

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“…Ashraf (2020) found that stock markets across the world reacted negatively to news of growth in a number of cases than growth in a number of deaths, as compared to Heyden and Heyden (2020), who in their study found that announcement of the first case had no impact on stock prices but the announcement of first death had a significant impact on share prices. Naidenova, Parshakov and Shakina (2020) conducted the study in similar lines and found that initial news of confirmed death had an insignificant impact but later social distancing led to a negative impact on financial markets. Liu, Manzoor, Wang, Zhang, and Manzoor (2020) added that stock markets of Asian countries reacted more swiftly to the epidemic and confirmed cases of COVID-19 only contributed towards the investor's fear which could be the reason behind such negative impacts.…”

Section: Covid-19 Outbreak and The Economymentioning

confidence: 99%

COVID-19 Impact on Nifty Banks: An Event Study Methodology

Digal¹,

Khatun²,

Seet³

2020

JIBE

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The financial sector, because of its catalytic role in the economy, has always been in the eye of the storm in economic difficulties. Due to the pandemic, the stock market had lost about 27 percent by April 2020 and bank nifty has had a lion’s share in pushing the index down to this level. Uncertainty arose as the containment of the disease and the availability of vaccines remain uncertain; this contributed to the plunge in investor confidence. Because of the central role of banks in the development initiatives of the governments, COVID-19 has become a significant threat to the sustainability of the banks globally, especially in developing economies. However, we believe every downfall brings in new opportunities for the investors. Therefore, the present study attempted to study both the gloom and boon and observed that there were short-term abnormal returns to the investors of nifty banks in two different periods - the detection of the first case of COVID-19 in India and the lockdown periods in India. The impacts of both the events are calculated by applying Market and Risk Adjusted model, Market Adjusted Return model and Mean Adjusted Return model. The paper concludes that the impacts were insignificant during the first period and was quite significant in the subsequent period. Nifty banks have earned negative abnormal returns during the pre-lockdown period and positive abnormal returns during post lockdown period which indicates that the markets reacted positively as India implemented the first lockdown.

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Section: Covid-19 Outbreak and The Economymentioning

confidence: 99%

COVID-19 Impact on Nifty Banks: An Event Study Methodology

Digal¹,

Khatun²,

Seet³

2020

JIBE

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“…When the literature is analyzed from a conceptual perspective, the effects of the pandemic are based on economic indicators and commercial dimensions (Cardona-Arenas & Serna-Gómez 2020; Ayittey et al, 2020;Baker et al, 2020;Ma et al, 2020;Mzoughi et al, 2020), especially the responses of the aviation sector (Lau et al, 2020) and tourism sector (Acar 2020;Günay et al, 2020), the volatility of stock index returns (Ahmar & Del Val 2020;Al-Awadhi et al, 2020;Alber 2020;Ceylan 2020;Eloriaga 2020;Estrada et al, 2020;Günay 2020;İzzeldin 2020;Kanno 2020;Liu 2020;Naidenova et al, 2020;Onali 2020;Pata 2020;Sansa 2020;Yılmazkuday 2020;Wang & Enilov 2020;Zeren & Hızarcı 2020), investors' portfolio preferences, recommendations of alternative investment instruments and discussions on transition to digital life (Corbet et al, 2020a;Kakushadze & Liew 2020;Yarovaya et al, 2020), investor sentiment by fears and biases (Albulescu 2020; Bansal 2020), scenarios and policies for a new normal (Chohan 2020;McKibin & Fernando 2020;Meier & Smith 2020;Elenev et al, 2020), sustainability-based corporate resilience (Albuquerque 2020;Cheema-Fox et al, 2020;Ding et al, 2020) and also comparing the process to previous crises (Alfaro et al, 2020;Arner et al, 2020;Goodell 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Country selection is carried out through similar criteria, which have a high spread of outbreak or poor number of confirmed cases (Alber 2020;Zeren & Hızarcı 2020). The Chinese stock markets are the most preferred by authors to investigate pandemic effects on return volatility over the world (Al-Awadhi et al, 2020;Alber 2020;Estrada et al, 2020;Gunay 2020;Liu 2020;Naidenova et al, 2020;Sansa 2020;Zeren & Hızarcı 2020). The Chinese financial markets are monitored in almost every study, especially since being the starting point of the outbreak and having a high share of the global supply chain.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Sectoral restrictions have also been a sign of great economic uncertainty and unpredictability. The extent of the pandemic process and its negative effects on the economy will cover the coming years, and it may change behavioral finance trends and increase fears in the stock market (Naidenova et al, 2020). In order to avoid economic losses, investors started to look for secured areas and alternative investment instruments from the first days.…”

Section: Introductionmentioning

confidence: 99%

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Covid-19 Salgını Başlangıcında Küresel Finansal Piyasalardan Erken Uyarı Sinyalleri

Eryüzlü¹

2020

TurkishStudies

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The Covid-19 Pandemic pose health security risks all over the world and makes its effects felt in every field. The objective of this paper is to observe the response of the financial markets of countries with the highest global health security index (GHSI) when the pandemic cases started and to guide investors. The main areas of the index are prevention, detection, reporting, rapid response, health system, compliance with international norms and risk environment. Many indicators are monitored under these basic areas. The motivation point of the study is that comparing the financial markets of countries with the highest global health security index has never been investigated. The top 5 countries selected are as follows: The United States, The United Kingdom, The Netherlands, Australia and Canada. In the selection of the stock exchange, the most known indexes of the countries on a global scale and the highest trading volume are taken. The common transaction days are taken as a basis short period that starts on 28 February 2020 and ends on 15 May 2020. This study showing early warning signals from global financial markets will also be a guide for future studies and long-term analysis. Dumitrescu Hurlin Panel Causality Test applied to the data; the causality from death and case rates to stock market returns is investigated. Hidden causality is important in decision making. Investors should make international investments by thinking in detail about the assets in their portfolio. In the near future, the importance of hidden causality relations research and early warning signals that occur with the effect of financial contagion will increase.

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“…Works related to sanitary crises or epidemics and pandemics that have occupied academic researchers with studies that seek to verify changes in the productive projects, in productive projects portfolios, in economic sectors, and national economies risk, should also be mentioned. Among these researches, Naidenova, Parshakov, and Shakina (2020), which deals with idiosyncratic and systematic shocks caused by the Covid-19 Pandemic in the financial markets, and the recent research by Atkenson (2020), by Barro, Ursua, and Weng (2020), by Anderson, Heesterbeek, Klinkenberg, and Hollingsworth (2020), Mckibbin and Fernando (2020), and Gourinchas (2020), on the influence of the crisis caused by the Covid-19 Pandemic in the macroeconomic environment.…”

Section: Introductionmentioning

confidence: 99%

Similarity evidence between the country risk and the idiosyncratic risk: An empirical study of the Brazilian case

Salles

2021

EJEM

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Purpose ─ This paper estimates the idiosyncratic risk (IDR) time series in the Brazilian economy and verifies its interaction with the Brazilian country risk indicators, measured by the EMBI+ (the Emerging Markets Bond Index).Methods ─ This paper estimates various regression models to capture the dynamic nature of the variables. The models include the heteroscedastic conditional autoregressive models and vector error correction models (VECM).Findings ─ The results show similarities or associations between the two indicators with interactions in the short and long run. The idiosyncratic risk proves to be a relevant indicator of the risk of economic activities implemented within the scope of the Brazilian economy and can help evaluate investments in related projects. This results also provide evidence of cointegration between the EMBI+ and IDR variations.Implication ─ This result suggests an alternative way for obtaining estimates of the expected return required by economic agents in financing and investing in productive and infrastructure projects necessary for developing the Brazilian economy that provides greater employability and good social welfare.Originality ─ This paper provides an alternative estimate of the time series proxy of idiosyncratic risk in the Brazilian economy. It also compares the results with the time series results obtained from the country risk measure EMBI+, widely used among resource managers in the international markets.

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Idiosyncratic and Systematic Shocks of COVID-19 Pandemic on Financial Markets

Cited by 9 publications

References 0 publications

COVID-19 Impact on Nifty Banks: An Event Study Methodology

COVID-19 Impact on Nifty Banks: An Event Study Methodology

Covid-19 Salgını Başlangıcında Küresel Finansal Piyasalardan Erken Uyarı Sinyalleri

Similarity evidence between the country risk and the idiosyncratic risk: An empirical study of the Brazilian case

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