Abstract
In this paper, we discuss the behavior of stock market returns in Tunisia during the COVID-19 outbreak. Using the OLS regression, we find that Bitcoin act as a hedge and Ethereum as a diversifier for Tunisia’s stock market before the COVID-19 outbreak; however, Bitcoin and Ethereum cannot generate benefits from portfolio diversification and hedging strategies for financial investors during the COVID-19. Moreover, Dash, Monero, and Ripple act as hedges before the COVID-19 outbreak and as diversifiers during this pandemic. Our results reveal that gold acts as a hedge and diversifier before the pandemic, but it's neither hedge nor a haven during the COVID-19 pandemic. Besides, the results indicated that the expected volatility of the US stock market has an impact on the Tunisian stock market. Finally, our results indicate that the growth rate of the COVID-19 confirmed cases and deaths harms Tunisia's stock market.
Highlights
According to the World Health Organization (WHO, 2020), the outbreak of the COVID-19 which appeared in Central China at the end of December 2019 spread to 216 countries, resulting in over 8.3 million confirmed cases and over 450,000 deaths worldwide
The findings revealed that cryptocurrencies (Bitcoin, Ethereum, Dash, Monero, and Ripple) and gold act as hedges and diversifiers before the COVID-19 outbreak while only Dash, Monero, and Ripple act as diversifiers during the COVID-19 pandemic, and gold doesn't have the haven property during this pandemic
The descriptive statistics of cryptocurrencies, Tunisian stock market indices, and asset returns for the two sub-periods before and during the COVID-19 outbreak are reported in Tables 1 and 2
Summary
According to the World Health Organization (WHO, 2020), the outbreak of the COVID-19 which appeared in Central China at the end of December 2019 spread to 216 countries, resulting in over 8.3 million confirmed cases and over 450,000 deaths worldwide. The pandemic can trigger several channels, including, for example, labor markets, global supply chains, consumption patterns, all of which can affect the global economy. One of the most important components of these channels is certainly the stock markets (see, for example, Al-Awadhi et al, 2020; Ahmar and Del Val, 2020; among others). Global financial markets faced tremendous uncertainties during the latest outbreak of the COVID-19. Crude oil prices have fallen to less than $20 a barrel, a low record since the beginning of the new century. Zhang et al (2020) argue that given the global expansion of the COVID-19, financial markets around the world have reacted to growing risks and shifting inter-market linkages. In another study, Zhang et al (2020) concluded that the instability
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