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Volatility dynamics of Tunisian stock market before and during COVID-19 outbreak and diversification benefits of Bitcoin

Author

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  • Marwa Ben Salem
  • Mohamed Fakhfekh
  • Ahmed Jeribi

Abstract

The objective of this paper is to select the appropriate GARCH model fit for analysing the volatility dynamics of the Tunisian sectoral stock market indices and Bitcoin during the COVID-19 outbreak period as well as to examine the Bitcoin diversification benefits. On using four models (EGARCH, FIGARCH, FIEGARCH, and TGARCH) and mean-variance spanning test, our findings prove that following the COVID-19 outbreak, the consumer service, financial and distribution, industrial, basic materials and banking sectors' return volatilities tend to have a relatively high positive and significant asymmetric effect, as compared to the pre-COVID period. Similarly, the results reveal that the Bitcoin proves to bring about significant diversification benefits once incorporated into a well-diversified benchmark portfolio, predominantly throughout the COVID-19 outbreak. Overall, our results could be of great benefit to investors seeking to account for any future volatility and implement special hedging strategies under COVID-19 crisis.

Suggested Citation

  • Marwa Ben Salem & Mohamed Fakhfekh & Ahmed Jeribi, 2023. "Volatility dynamics of Tunisian stock market before and during COVID-19 outbreak and diversification benefits of Bitcoin," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 13(5), pages 651-672.
    • Handle: RePEc:ids:afasfa:v:13:y:2023:i:5:p:651-672
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    Cited by:

    1. Ionuț Nica & Ștefan Ionescu & Camelia Delcea & Nora Chiriță, 2024. "Quantitative Modeling of Financial Contagion: Unraveling Market Dynamics and Bubble Detection Mechanisms," Risks, MDPI, vol. 12(2), pages 1-42, February.

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