The COVID-19 Black Swan Crisis: Reaction and Recovery of Various Financial Markets

Yarovaya, Larisa; Matkovskyy, Roman; Jalan, Akanksha

doi:10.2139/ssrn.3611587

Cited by 15 publications

(14 citation statements)

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“…Moreover, policymakers and investors cannot accept cryptocurrencies (especially Bitcoin) as safe havens, but only as highly volatile and speculative assets (which is in line with the work of [10,16,44]). Finally, the study does not come to an ultimate consensus on whether the ongoing COVID-19 crisis is a "Black Swan" event [1][2][3][4][5]14] or not [15]. Since it is too early to comment on it, it is left for future studies to further examine the issue.…”

Section: Discussionmentioning

confidence: 99%

“…Likewise, Ethereum was more efficient during and after the outbreak of the COVID-19 crisis. The study by [14] analyzed the impact of the COVID-19 crisis on 15 equity indices, 4 bond benchmark indices, 9 precious metals, and 3 cryptocurrencies (Bitcoin, Ethereum, and Litecoin) using a quantile autoregression model. The study found that the COVID-19 crisis could be a "Black Swan" event, especially for cryptocurrencies.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

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COVID-19 Pandemic: Is the Crypto Market a Safe Haven? The Impact of the First Wave

Vuković

Maiti

Grubišić³

et al. 2021

Sustainability

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The present study investigated whether the crypto market is a safe haven. The study argues that during the first wave of the COVID-19 crisis, gold and oil, as typical global commodities, could have been diversifiers. The study developed a unique COVID-19 global composite index that measures COVID-19 pandemic time-variant movements on each day. The study used OLS (ordinary least squares), quantile, and robust regressions to check whether the COVID-19 crisis has had any significant direct influence on the crypto market. The OLS, quantile, and robust regressions estimates confirmed that there was no statistically significant direct influence of the COVID-19 crisis on the crypto market in the first wave period. However, the study found spillovers from risky assets (S&P 500) on the crypto market, with Tether as an exception. Due to this special characteristic, Tether might present a safe haven within the crypto market.

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Section: Discussionmentioning

confidence: 99%

Section: Theoretical Backgroundmentioning

confidence: 99%

COVID-19 Pandemic: Is the Crypto Market a Safe Haven? The Impact of the First Wave

Vuković

Maiti

Grubišić³

et al. 2021

Sustainability

View full text Add to dashboard Cite

show abstract

“…Consequently, power Overall, the findings of the SVAR impulse response functions suggest that COVID-19 cases have significantly and adversely affected all three endogenous variables, i.e., BDI, MSCI, and MSCIE. The findings are expected as the COVID-19 pandemic has created an unprecedented shock and uncertainty over the global business activity, which in turn has led the global economy and the financial markets to a crisis (Choi et al 2020;Yarovaya et al 2020b). However, the findings are in accord with the recent studies conducted by Ozili and Arun (2020), Baldwin andMauro (2020), andChowdhury et al (2021) in terms of a significant negative effect of COVID-19 on economic activity.…”

Section: Structural Vector Autoregression (Svar)mentioning

confidence: 98%

“…The findings indicate that the financial markets are more sensitive to the COVID-19 crisis. Since investors fear a recession caused by the sharp escalation of the COVID-19 crisis, they react immediately to the stock markets with a very pessimistic attitude (Yarovaya et al 2020b), resulting in a significant negative effect of COVID-19 on stock markets. Another important finding from the above analysis is that the cumulative IRFs values for all the three endogenous variables against COVID-19 remain negative in the long run, indicating that the COVID-19 pandemic is hitting the financial and economic markets in the long run.…”

Section: Structural Vector Autoregression (Svar)mentioning

confidence: 99%

Spillovers of the COVID-19 Pandemic: Impact on Global Economic Activity, the Stock Market, and the Energy Sector

Hasan

Mahi

Sarker

et al. 2021

JRFM

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In this study, we examine the effect of the COVID-19 pandemic on global economic activity, the stock market, and the energy sector considering the sizable damaging impacts in these crucial aspects. Our results, based on the structural vector autoregression (SVAR) model for the data from 21 January 2020, to 26 February 2021, indicate that the COVID-19 cases significantly and negatively impact all the endogenous variables such as Baltic dry index (BDI), MSCI world index (MSCI), and MSCI world energy index (MSCIE). Our results also reveal that of the three variables, the stock markets indices (MSCI and MSCIE) are comparatively more affected by COVID-19 cases. The findings imply that the stock markets are more sensitive to the COVID-19 pandemic than the real economy. The results further indicate that of the three variables, the MSCIE index is the most affected by COVID-19 due to two factors: one is the dwindling power consumption caused by COVID-19 and the other is the decline in oil price because of the Russia–OPEC price war. Our findings enhance the understanding of the spillover impacts of the global health crisis on economic activity, the stock market, and the energy sector. Moreover, our study offers insights for policymakers and governments into the relationship dynamics of COVID-19 that would help them be more cautious in taking preventive measures against the health crisis to save the economy, the stock market, and the energy sector from falling into a more deepened crisis.

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“…Their findings suggest that diversifying global portfolios via gold or Islamic stocks will likely abate the portfolio's downside risk. Yarovaya et al (2020b) compare the Islamic and conventional equity funds during three sub-samples of the COVID-19 pandemic, showing that Islamic equity funds performed better than their conventional counterparts in terms of volatility timing, investments styles, and riskadjusted-performance. The findings demonstrated the Islamic equity funds' resilience against the pandemic shocks.…”

Section: Literature Reviewmentioning

confidence: 99%

Pandemic crisis versus global financial crisis: Are Islamic stocks a safe-haven for G7 markets?

Arif

Naeem

Hasan

et al. 2021

Economic Research-Ekonomska Istraživanja

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This study draws a comparison between the Global Financial Crisis (GFC) and the COVID-19 pandemic crisis to assess the safehaven potential of Islamic stocks for G7 stock markets. We employ the cross-quantilogram framework of Han et al., which considers the non-linearity in the relationship, and thus captures the correlation between the Islamic and G7 stock markets across various quantiles reflecting different market conditions. The analysis also includes the time-varying cross-quantile correlation to observe the evolution of Islamic stocks' safe-haven potential. Our full sample analysis shows that Islamic stocks do not exhibit safe-haven properties for G7 stock markets. During the GFC period, Islamic stocks show some diversification benefits for the G7 stock markets. Notably, Islamic stocks emerged as a robust safe-haven asset for the G7 stock markets during the pandemic crisis. The study carries essential insights for equity investors and regulators of G7 and other countries to implement diversification/hedging strategies that would involve Islamic stocks to protect equity investments and the overall financial system amid the financial downturns.

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The COVID-19 Black Swan Crisis: Reaction and Recovery of Various Financial Markets

Cited by 15 publications

References 0 publications

COVID-19 Pandemic: Is the Crypto Market a Safe Haven? The Impact of the First Wave

COVID-19 Pandemic: Is the Crypto Market a Safe Haven? The Impact of the First Wave

Spillovers of the COVID-19 Pandemic: Impact on Global Economic Activity, the Stock Market, and the Energy Sector

Pandemic crisis versus global financial crisis: Are Islamic stocks a safe-haven for G7 markets?

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