Stock markets’ reaction to COVID-19: Analyses of countries with high incidence of cases/deaths in Africa

Abstract

Exploring daily panel dataset spanning January 5, 2015 to January 28, 2021, we examine the reaction prowess of African stock markets to the different phases of the COVID-19 outbreak namely, pre–COVID period; epidemic period; and pandemic period. We show that irrespective of the different phases of the COVID-19 outbreak, South Africa ranked first as the country with the highest incidence of COVID-19 in Africa both in terms of number of confirmed cases and deaths. However, while Morocco and Tunisia ranked second and third in terms of the number of COVID-19 cases, it was Egypt that ranked second in terms of the number COVID-19 deaths. Employing a PMG –based panel–ARDL model, we offer evidence –based insights on the dynamic of stock markets during COVID-19. We show that number of confirmed cases rather than number deaths tend to be responsible for the declining stock returns in Africa during the pandemic phase of the COVID-19 outbreak. Whereas, the evidence of declining stock returns during the epidemic phase of the COVID-19 appears to be mainly attributable to changes in the international oil prices and exchange rates, respectively. That said the effectiveness or otherwise of efforts at minimizing negative reaction of stock returns to COVID-19 cannot be in isolation of whether the emphasis is on the number of confirmed cases and/or the number of confirmed deaths.

Macroeconomics and the LQ45 Index: Is the COVID-19 pandemic making a difference?

“…(Khan et al, 2020). Several previous studies identified the impact of rising Covid-19 cases on the stock market in several countries when the Covid-19 pandemic was taking place, such as the results of research by Priyono (2022), Kamaludin et al (2021), Li et al (2021), and Udeaja and Isah (2021). These studies found a negative effect on the increase in Covid-19 cases on stock indices because it impacted the performance of the companies being invested.…”

The role of economic policy uncertainty and social welfare in the view of ecological footprint: evidence from the traditional and novel platform in panel ARDL approaches

“…The difference between the two techniques lies in the estimation procedure. The MG estimator relies on estimating N time-series regressions and averaging the coefficients, whereas the PMG estimator relies on a combination of pooling and averaging coefficients (Udeaja and Isah 2022 ). DFE is the latest panel ARDL estimator, which imposes homogeneity restrictions on short- and long-term segments.…”

Impact of COVID-19 pandemic on Moroccan sectoral stocks indices

“…This will ultimately optimize decision-making regarding asset pricing and allow better portfolio diversification during out- breaks similar to COVID-19. Additionally, Morocco is the second African country most af- fected by COVID-19, barely behind South Africa [47] . Also, Takyi and Bentum-Ennin [45] report that COVID-19 has also had a significant and negative impact on the Moroccan stock market.…”