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Determining the Return Volatility of Major Stock Markets Before and During the COVID-19 Pandemic by Applying the EGARCH Model

Author

Listed:
  • Letife Özdemir

    (University of Afyonkocatepe)

  • Ercan OZEN

    (University of Usak)

  • Simon Grima

    (University of Malta)

  • Inna RomÄ nova

    (University of Latvia)

Abstract

With this study, we aim to determine the effect of the Covid-19 pandemic on the return volatility of the DJI, the DAX, the FTSE100 and the CAC40 stock indexes. We take return volatility between 1st January 2019 and 17th July 2020 and split it into two separate periods - before the Covid-19 pandemic outbreak and the first wave of the ‘In-Pandemic’ period. Only the so-called first wave of the pandemic was chosen to avoid the influence of knowledge of possible vaccines and antiviral solutions. Data were analysed by using the exponential GARCH (EGARCH) model. Findings show excessive volatility in the major stock markets with short volatility persistence and the presence of leverage in returns during the first wave of the Covid-19 pandemic outbreak. Moreover, during the pandemic period, positive shocks have been observed to have a greater effect than negative socks on the stock index return volatility.

Suggested Citation

  • Letife Özdemir & Ercan OZEN & Simon Grima & Inna RomÄ nova, 2021. "Determining the Return Volatility of Major Stock Markets Before and During the COVID-19 Pandemic by Applying the EGARCH Model," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 68(4), pages 405-419, October.
    • Handle: RePEc:aic:saebjn:v:68:y:2021:i:4:p:405-419:n:2
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    References listed on IDEAS

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    Cited by:

    1. Emre BULUT & Ahmed İhsan ŞİMŞEK, 2023. "The Relationship Between the Stock Market Volatility, Liquidity, Exchange Rate Return, and Stock Return During the COVID-19 Period: The case of the BIST 100 Index," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 7(1), pages 121-135, June.
    2. Kwadwo Boateng Prempeh & Joseph Magnus Frimpong & Newman Amaning, 2023. "Determining the return volatility of the Ghana stock exchange before and during the COVID-19 pandemic using the exponential GARCH model," SN Business & Economics, Springer, vol. 3(1), pages 1-20, January.

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