Stock Market Reactions to COVID-19 Pandemic Outbreak: Quantitative Evidence from ARDL Bounds Tests and Granger Causality Analysis

Abstract

This paper examines the linkages in financial markets during coronavirus disease 2019 (COVID-19) pandemic outbreak. For this purpose, daily stock market returns were used over the period of December 31, 2019–April 20, 2020 for the following economies: USA, Spain, Italy, France, Germany, UK, China, and Romania. The study applied the autoregressive distributed lag (ARDL) model to explore whether the Romanian stock market is impacted by the crisis generated by novel coronavirus. Granger causality was employed to investigate the causalities among COVID-19 and stock market returns, as well as between pandemic measures and several commodities. The outcomes of the ARDL approach failed to find evidence towards the impact of Chinese COVID-19 records on the Romanian financial market, neither in the short-term, nor in the long-term. On the other hand, our quantitative approach reveals a negative effect of the new deaths’ cases from Italy on the 10-year Romanian bond yield both in the short-run and long-run. The econometric research provide evidence that Romanian 10-year government bond is more sensitive to the news related to COVID-19 than the index of the Bucharest Stock Exchange. Granger causality analysis reveals causal associations between selected stock market returns and Philadelphia Gold/Silver Index.

The asymmetric effect of COVID-19 outbreak, commodities prices and policy uncertainty on financial development in China: evidence from QARDL approach

“…It suggests that COVID19 affects financial development, and as a result, financial development affects COVID19. These results are consistent with Gherghina et al (2020). Similarly, the outcomes also indicate two-way causality at a level of 1% significance between financial development and oil prices (DFD t to DOIL t) .…”

COVID-19 Deaths Cases Impact on Oil Prices: Probable Scenarios on Saudi Arabia Economy

“…Gherghina examined the linkages in financial markets during coronavirus disease 2019 (COVID-19) pandemic outbreak for the following economies: USA, Spain, Italy, France, Germany, UK, China, and Romania. The quantitative approach reveals a negative effect of the new deaths' cases from Italy on the 10-year Romanian bond yield both in the short-run and long-run ( 55 ).…”

How Main Stock Exchange Indices React to Covid-19 Pandemic: Daily Evidence from East Asian Countries

“…It is thought that these figures reflect the pandemic very well and using the cumulative figures may be misleading. Moreover, a negative relationship between the pandemic indicators and the main indices is expected by considering recent studies (Adekoya and Kofi Nti 2020;Ahmed 2020;Al-Awadhi et al 2020;Ali, Alam, and Rizvi 2020;Ashraf 2020;Bahrini and Filfilan 2020;Baker et al 2020;Chowdhury and Abedin 2020;Corbet et al 2020;Engelhardt et al 2020;Erdem 2020;Gherghina, Armeanu, and Joldeș 2020;Kartal, Depren, and Kılıç Depren 2020;Liu et al 2020;Mazur, Dang, and Vega 2020;Narayan, Phan, and Liu 2020;Phan and Narayan 2020;Shehzad, Xiaoxing, and Kazouz 2020;Topcu and Gulal 2020;Zhang, Hu, and Ji 2020;Akhtaruzzaman, Boubaker, and Şensoy 2020a). However, there can be neutral nexus between the pandemic indicators and the main indices if the pandemic becomes very common and spreads to every country and it is perceived as a normal part of daily life.…”