Stock Market Volatility Response to COVID-19: Evidence from Thailand

Abstract

This study investigated how stock market volatility responded dynamically to unexpected changes during the COVID-19 pandemic and the resulting uncertainty in Thailand. Using a multivariate GARCH-BEKK model, the conditional volatility dynamics, the interlinkages, and the conditional correlations between stock market volatility and the increasing rate of COVID-19 infection cases are examined. The increased rate of COVID-19 infections impacts stock returns detrimentally; in Thailand, stock market volatility responses are asymmetric in the increase and decline situations. This disparity is due to the unfavourable impact of the pandemic’s volatility. Finally, we acknowledge that directional volatility spillover effects exist between the increase in COVID-19 cases and stock returns, suggesting that time-varying conditional correlations occur and are generally positive. Using this study’s results, governments and financial institutions can devise strategies for subsequent recessions or financial crises. Furthermore, investment managers can manage portfolio risk and forecast patterns in stock market volatility. Academics can apply our methodology in future investment trend studies to analyse additional variables in the economic system, such as the value of the US dollar, the price of commodities, or GDP.

Assessing Financial Stability in Turbulent Times: A Study of Generalized Autoregressive Conditional Heteroskedasticity-Type Value-at-Risk Model Performance in Thailand’s Transportation Sector during COVID-19

“…The stock markets globally exhibited marked negative responses, reflecting investor apprehensions regarding the economic implications of the pandemic (Ramelli and Wagner 2020;Baker et al 2020). Specifically, the Thai stock market demonstrated unfavorably asymmetric volatility, with stock returns inversely correlated with the escalation in COVID-19 cases within Thailand (Suwannapak and Chancharat 2022).…”

“…Additionally, lockdown measures and altered transportation practices led to operational inefficiencies within transportation companies, as elucidated by Aunyawong et al (2021). As a cumulative effect of these disruptions, the transportation sector witnessed a pronounced decline in net earnings, the most significant across all sectors (Suwannapak and Chancharat 2022). This narrative underscores the extensive impact of the COVID-19 pandemic on the transportation sector, highlighting the resultant financial difficulties and operational challenges.…”

“…Government-imposed lockdowns precipitated a cascade of economic constraints, disrupting production and mobility (Mazur et al 2021;Ozili and Arun 2020;Açikgöz and Günay 2020;Sohrabi et al 2020). This led to a notable decline in the net earnings of the transportation sector, exacerbating operational costs and inefficiencies (Suwannapak and Chancharat 2022;Charoennapharat and Chaopaisarn 2022). The aviation industry, including major airlines such as Thai Airways, faced heightened bankruptcy risks during this period (Maneenop and Kotcharin 2020;Abdullah et al 2020).…”

The impact of COVID-19 related news to stock performance on pre-crisis, crisis, and post-crisis: Study case in Indonesia’s finance sector and SRI-KEHATI index

“…Investors' panic selling in response to the crisis might be sparked by unexpected shocks, panic, and anxiety brought on by pandemics [33]. Fear of COVID-19 has been confirmed by [34] to make stock market volatility worse.…”