Impact of COVID-19 on stock market efficiency: Evidence from developed countries

Özkan, Oktay

doi:10.1016/j.ribaf.2021.101445

Cited by 113 publications

(71 citation statements)

References 39 publications

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“…Our analysis is related to a growing literature that establishes a link between the COVID-19 pandemic and increased volatility and uncertainty in financial markets (Akhtaruzzaman et al 2020;Alexakis et al 2021;Bouri et al 2020;Fernandez-Perez et al 2020;Goodell 2020;Sharif et al 2020;Haldar and Sethi 2020;Milcheva 2021;Ozkan 2021;Salisu et al 2021;Scherf et al 2021). The general theme in this emerging strand of the literature is that the pandemic has led to increased uncertainty regarding economic fundamentals, which in turn has led to a significant dip in financial markets driven by the greater risk premium required on risky assets.…”

Section: Introductionmentioning

confidence: 91%

“…The general theme in this emerging strand of the literature is that the pandemic has led to increased uncertainty regarding economic fundamentals, which in turn has led to a significant dip in financial markets driven by the greater risk premium required on risky assets. However, the effect of the lockdown restrictions due to the pandemic has been rather heterogeneous across the global markets (Scherf et al 2021), while Ozkan (2021) documents differences in departures from market efficiency due to the pandemic across the global markets. Given this, an interesting question is whether or not such heterogeneity in how global financial markets respond to the pandemic is in part driven by herding (or anti-herding) behavior.…”

Section: Introductionmentioning

confidence: 99%

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COVID-19 Pandemic and Investor Herding in International Stock Markets

Bouri

Demirer

Gupta

et al. 2021

Risks

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The aim of this study is to understand the effect of the recent novel coronavirus pandemic on investor herding behavior in global stock markets. Utilizing a daily newspaper-based index of financial uncertainty associated with infectious diseases, we examine the association between pandemic-induced market uncertainty and herding behavior in a set of 49 global stock markets. More specifically, we study the pattern of cross-sectional market behavior and examine whether the pandemic-induced uncertainty drives directional similarity across the global stock markets that cannot be explained by the standard asset pricing models. Utilizing a time-varying variation of the static herding model, we first identify periods during which herding is detected. We then employ probit models to examine the possible association between pandemic-induced uncertainty and the formation of herding. Our findings show a strong association between herd formation in stock markets and COVID-19 induced market uncertainty. The herding effect of COVID-19 induced market uncertainty is particularly strong for emerging stock markets as well as European PIIGS stock markets that include some of the hardest hit economies in Europe by the pandemic. The findings establish a direct link between the recent pandemic and herd formation among market participants in global financial markets. Considering the evidence that herding behavior can drive security prices away from equilibrium values supported by fundamentals and further contribute to price fluctuations in financial markets, our findings have significant implications for policy makers and investors in their efforts to monitor investor sentiment and mitigate mis-valuations that might occur as a result. Furthermore, the evidence on the behavioral pattern of stock investors in relation to infectious diseases uncertainty can be useful in studying price discovery in stock markets and might help market participants in forming hedging strategies to mitigate downside risk in their investment portfolios.

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Section: Introductionmentioning

confidence: 91%

Section: Introductionmentioning

confidence: 99%

COVID-19 Pandemic and Investor Herding in International Stock Markets

Bouri

Demirer

Gupta

et al. 2021

Risks

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“…In current pandemic situation, default risk of companies has increased, which ultimately restricted the banks to lend the loans to industries. Moreover, COVID-19 has also affected the performance of stock market [1,3], which can deviate the equity financing option for investment. In addition to these theories, Tobin has proposed his famous model known as Q theory, which states that new investment decision depends upon its replacement cost.…”

Section: -Theoretical Framework and Hypotheses Developmentmentioning

confidence: 99%

Assessing the Impact of COVID-19 on Corporate Investment Behavior

et al. 2021

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The current wave of COVID-19 outbreak has created new strategical challenges for policy officials of the industrial sector across the world. The effect of COVID-19 is more in developing economies where industrial sector is already struggling for its stability. This study introduces the impact of COVID-19 on the corporate investment behavior of non-financial publicly listed firms of Pakistan. To achieve the objective, we employ the panel data ranging from 2010 to 2020 and apply the difference-in-differences (DID) model to quantifies the empirical relationship. The outcomes of DID model suggest that the pandemic period and treatment have a significant and negative impact on corporate capital investment behavior. During pandemic spread period, the enterprises have limited their investment into fixed assets due to less productive use of such assets. Similarly, industries that exist in high-impact areas face a negative investment growth rate due to quarantine policy, fewer social movements, and high installing cost of new machinery. However, this negative effect diminishes across those firms that have a quick cash inflow rate and more availability of bank loans. These two factors serve as a financial setback against the adversities of pandemic. By drawing upon the empirical reasoning on the effect of COVID-19, this study also presents possible solutions to alienate unfavorable impacts of this pandemic. Current analysis can be considered as an early attempt towards investigating the consequences of COVID-19 on investment decisions of industrial sector.JEL Classification: G32: G31: G40: C33 Doi: 10.28991/esj-2021-SPER-11 Full Text: PDF

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“…Since it was difficult to expect and has never hitherto arose, this slump was described as a "black swan" event (Yarovaya et al 2021). As compared with the 2008 crash which commenced in the United States and progressively diffused to other nations with a substantial time postponement, the coronavirus disease rapidly brought the worldwide economy to a stoppage by instantaneously hampering demand and supply lines around the globe due to extensive lockdowns (Ozkan 2021). Anser et al (2021) noticed that COVID-19 contaminated cases are the central element that impedes financial activities and reduces money allocation, but a growing number of recovered cases offer investors' trust to boost stock trade across nations.…”

Section: Introductionmentioning

confidence: 99%

COVID-19 Pandemic and Romanian Stock Market Volatility: A GARCH Approach

Gherghina

Armeanu

Joldeș

2021

JRFM

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This paper investigates the volatility of daily returns on the Romanian stock market between January 2020 and April 2021. Volatility is analyzed by means of the representative index for Bucharest Stock Exchange (BSE), namely, the Bucharest Exchange Trading (BET) index, along with twelve companies traded on BSE. The quantitative investigation was performed using GARCH approach. In the survey, the GARCH model (1,1) was applied to explore the volatility of the BET and BSE traded shares. Conditional volatility for the daily return series showed noticeable evidence of volatility that shifts over the explored period. In the first quarter of 2020, the Romanian equity market volatility increased to a level very close to that recorded during the global financial crisis of 2007–2009. Over the next two quarters, volatility had a downward trend. Besides, after VAR estimation, no causal connection was found among the COVID-19 variables and the BET index.

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Impact of COVID-19 on stock market efficiency: Evidence from developed countries

Abstract: Graphical abstract Market (in)efficiency of the United States, Spain, the United Kingdom, Italy, France, and Germany during the COVID-19 pandemic.

Cited by 113 publications

References 39 publications

COVID-19 Pandemic and Investor Herding in International Stock Markets

COVID-19 Pandemic and Investor Herding in International Stock Markets

Assessing the Impact of COVID-19 on Corporate Investment Behavior

COVID-19 Pandemic and Romanian Stock Market Volatility: A GARCH Approach

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