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Impact of the COVID-19 Pandemic on the Financial Market Efficiency of Price Returns, Absolute Returns, and Volatility Increment: Evidence from Stock and Cryptocurrency Markets

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  • Tetsuya Takaishi

    (Department of Liberal Arts, Hiroshima University of Economics, Hiroshima 731-0192, Japan)

Abstract

This study examines the impact of the coronavirus disease 2019 (COVID-19) pandemic on market efficiency by analyzing three time series—price returns, absolute returns, and volatility increments—in the stock (Deutscher Aktienindex, Nikkei 225, Shanghai Stock Exchange (SSE), and Volatility Index) and cryptocurrency (Bitcoin and Ethereum) markets. The effect is found to vary by asset class and market. In the stock market, while the pandemic did not influence the Hurst exponent of volatility increments, it affected that of returns and absolute returns (except in the SSE, where returns remained unaffected). In the cryptocurrency market, the pandemic did not alter the Hurst exponent for any time series but influenced the strength of multifractality in returns and absolute returns. Some Hurst exponent time series exhibited a gradual decline over time, complicating the assessment of pandemic-related effects. Consequently, segmented analyses by pandemic period may erroneously suggest an impact, warranting caution in period-based studies.

Suggested Citation

  • Tetsuya Takaishi, 2025. "Impact of the COVID-19 Pandemic on the Financial Market Efficiency of Price Returns, Absolute Returns, and Volatility Increment: Evidence from Stock and Cryptocurrency Markets," JRFM, MDPI, vol. 18(5), pages 1-16, April.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:5:p:237-:d:1645613
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    References listed on IDEAS

    as
    1. Tetsuya Takaishi, 2022. "Time Evolution of Market Efficiency and Multifractality of the Japanese Stock Market," JRFM, MDPI, vol. 15(1), pages 1-12, January.
    2. Tetsuya Takaishi & Takanori Adachi, 2020. "Market Efficiency, Liquidity, and Multifractality of Bitcoin: A Dynamic Study," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 27(1), pages 145-154, March.
    3. Raza, Syed Ali & Shah, Nida & Suleman, Muhammed Tahir, 2024. "A multifractal detrended fluctuation analysis of Islamic and conventional financial markets efficiency during the COVID-19 pandemic," International Economics, Elsevier, vol. 177(C).
    4. Wang, Jingjing & Wang, Xiaoyang, 2021. "COVID-19 and financial market efficiency: Evidence from an entropy-based analysis," Finance Research Letters, Elsevier, vol. 42(C).
    5. Masaaki Fukasawa, 2011. "Asymptotic analysis for stochastic volatility: martingale expansion," Finance and Stochastics, Springer, vol. 15(4), pages 635-654, December.
    Full references (including those not matched with items on IDEAS)

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