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The nexus between COVID-19 fear and stock market volatility

Author

Listed:
  • Weiqing Li
  • Fengsheng Chien
  • Hafiz Waqas Kamran
  • Talla M Aldeehani
  • Muhammad Sadiq
  • Van Chien Nguyen
  • Farhad Taghizadeh-Hesary

Abstract

This study described an empirical link between COVID-19 fear and stock market volatility. Studying COVID-19 fear with stock market volatility is crucial for planning adequate portfolio diversification in international financial markets. The study used AR (1) – GARCH (1,1) to measure stock market volatility associated with the COVID-19 pandemic. Our findings suggest that COVID-19 fear is the ultimate cause driving public attention and stock market volatility. The results demonstrate that stock market performance and GDP growth decreased significantly through average increases during the pandemic. Further, with a 1% increase in COVID-19 cases, the stock return and GDP decreased by 0.8%, 0.56%, respectively. However, GDP growth demonstrated a slight movement with stock exchange. Moreover, public attention to the attitude of buying or selling was highly dependent on the COVID-19 pandemic reported cases index, death index, and global fear index. Consequently, investment in the gold market, rather than in the stock market, is recommended. The study also suggests policy implications for key stakeholders.

Suggested Citation

  • Weiqing Li & Fengsheng Chien & Hafiz Waqas Kamran & Talla M Aldeehani & Muhammad Sadiq & Van Chien Nguyen & Farhad Taghizadeh-Hesary, 2022. "The nexus between COVID-19 fear and stock market volatility," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 1765-1785, December.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:1765-1785
    DOI: 10.1080/1331677X.2021.1914125
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    Cited by:

    1. Liu, Lian & Nemoto, Naoko & Lu, Changrong, 2023. "The Effect of ESG performance on the stock market during the COVID-19 Pandemic — Evidence from Japan," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 702-712.
    2. Yen-Chang Chen & Ying-Sing Liu, 2023. "Market Efficiency and Stock Investment Loss Aversion Guide During COVID-19 Pandemic Events: The Case for Applying Data Mining," SAGE Open, , vol. 13(4), pages 21582440231, December.
    3. Lu, Ran & Xu, Wen & Zeng, Hongjun & Zhou, Xiangjing, 2023. "Volatility connectedness among the Indian equity and major commodity markets under the COVID-19 scenario," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1465-1481.
    4. Khan, Qasim Raza & Xinshu, Mao & Qamri, Ghulam Muhammad & Nawaz, Ahmad, 2023. "From COVID to conflict: Understanding the deriving forces of environment and implications for natural resources," Resources Policy, Elsevier, vol. 83(C).
    5. Minh Thi Hong Dinh, 2023. "How Does Market Cap Play Its Role in Returns during COVID-19? The Case of Norway," JRFM, MDPI, vol. 16(9), pages 1-13, September.

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