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A TGARCH Quantification of the Average Effect of COVID-19 Cases on Share Prices by Sector: Comparing the US and the UK

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  • Hussein Hassan

    (Department of Economics, University of Reading)

  • Minko Markovski

    (Department of Economics, University of Reading)

  • Alexander Mihailov

    (Department of Economics, University of Reading)

Abstract

This paper proposes an econometric algorithm that quantifies by a single number (in the interval from 0 to –1) the average negative effect of the daily news regarding COVID-19 cases on stock-market prices by business sector. We apply it to the US and the UK, which results in a data-driven, ‘objective’ ranking of the adverse overall impact of the huge and persistent COVID-19 shock to sectoral share prices in these two leading economies that account for some 45% of global equity market capitalisation. Our quantification is based on a sample covering the full duration of the pandemic (1 January 2020 – 20 October 2022) and on a TGARCH approach, which we justify as particularly appropriate for the task at hand. Consequently, we establish three ranges of such an average impact: weak, moderate and strong. We, then, compare the sectors in the two countries and uncover similarities as well as differences. The most affected sector in both countries is technology, while industry comes next when both countries are considered together. Yet, there are sectoral differences too, with the specificity that the share prices of financials and utilities in the UK were the least affected of all business sectors in both economies. Our empirical quantification and comparison by sector, thus, points not only to some common patterns but also to the importance in explaining the differences of country-specific production and trade structures as well as of institutions and policies when dealing with the pandemic and its influence on stock-market prices.

Suggested Citation

  • Hussein Hassan & Minko Markovski & Alexander Mihailov, 2023. "A TGARCH Quantification of the Average Effect of COVID-19 Cases on Share Prices by Sector: Comparing the US and the UK," Economics Discussion Papers em-dp2023-15, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2023-15
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19 cases; sectoral stock-market prices; TGARCH quantification; daily correlations; US; UK;
    All these keywords.

    JEL classification:

    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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