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The impact of COVID-19 on global stock markets: early linear and non-linear evidence for Italy

Author

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  • Theodoros Daglis

    (National Technical University of Athens)

  • Ioannis G. Melissaropoulos

    (National Technical University of Athens)

  • Konstantinos N. Konstantakis

    (National Technical University of Athens)

  • Panayotis G. Michaelides

    (National Technical University of Athens)

Abstract

The scientific community still struggles to understand the magnitude of the worldwide infections and deaths induced by COVID-19, partly ignoring the financial consequences. In this paper, using the autoregressive fractionally integrated moving average (ARFIMA)—general autoregressive conditional heteroskedasticity (GARCH) model, we quantify and show the impact of the COVID-19 spread in Italy, utilizing data for the stock market. Using information criteria and forecasting accuracy measures, we show that the COVID-19 confirmed cases contribute with statistically significant information to the modeling of volatility, and also increase the forecasting ability of the volatility of the Italian stock market index, leading to a decrease in the mean stock index.

Suggested Citation

  • Theodoros Daglis & Ioannis G. Melissaropoulos & Konstantinos N. Konstantakis & Panayotis G. Michaelides, 2022. "The impact of COVID-19 on global stock markets: early linear and non-linear evidence for Italy," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 485-495, April.
    • Handle: RePEc:spr:eaiere:v:19:y:2022:i:1:d:10.1007_s40844-021-00230-4
    DOI: 10.1007/s40844-021-00230-4
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    More about this item

    Keywords

    COVID-19; Stock market; Italy;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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