Abstract
The economic and financial chaos caused by COVID-19 has been a discussion topic since the beginning of 2020. This study intends to provide a parallel comparison of volatility change and external shock persistence of the Islamic and conventional stock indexes of the Pakistan Stock Exchange. The daily stock index was extracted from Eikon Thomson Reuters for the conventional and Islamic stock index from Jan 2018 to April 2021, which was further divided in three periods, i.e., full, pre-, and post-pandemic period. The data have been analyzed using generalized autoregressive conditional heteroscedasticity (GARCH). An optimally parameterized GARCH (1,1) model is used to measure volatility change for both the pre- to post-pandemic periods. The results suggest that the magnitude of risk in a conventional index is significantly higher than that of the Islamic stock index for the period of study. However, the level of COVID shock persistence is longer in the KSE (conventional) index compared to the KMI (Islamic) index.
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