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The Impact of COVID-19 on Stock Market Volatility in Pakistan

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  • Ateeb Akhter Shah Syed
  • Kaneez Fatima

Abstract

This paper examines the impact of coronavirus (COVID-19) on stock market volatility (SMV) in Pakistan by controlling the effect of exchange rate, interest rate and government/central bank interventions to combat the pandemic. We used the vector autoregressive (VAR) model over a sample period ranging from February 25, 2020 to December 7, 2020. We find that a shock to total daily coronavirus cases in Pakistan lead to a significant increase in SMV. This result is aligned with a vast literature on pandemics and investors uncertainty and remains robust to several robustness checks applied in our analysis.

Suggested Citation

  • Ateeb Akhter Shah Syed & Kaneez Fatima, 2021. "The Impact of COVID-19 on Stock Market Volatility in Pakistan," Papers 2103.03219, arXiv.org.
    • Handle: RePEc:arx:papers:2103.03219
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    References listed on IDEAS

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    1. Scott R Baker & Nicholas Bloom & Steven J Davis & Kyle Kost & Marco Sammon & Tasaneeya Viratyosin & Jeffrey Pontiff, 0. "The Unprecedented Stock Market Reaction to COVID-19," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 742-758.
    2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    3. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    5. Zaremba, Adam & Kizys, Renatas & Aharon, David Y. & Demir, Ender, 2020. "Infected Markets: Novel Coronavirus, Government Interventions, and Stock Return Volatility around the Globe," Finance Research Letters, Elsevier, vol. 35(C).
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