Does COVID-19 News Influence Financial Market Volatility in Tunisia?

Abstract

This chapter examines the effect of surprises from financial markets announcements relating to new, confirmed, and death cases of COVID-19 in USA on the volatility of financial markets in Tunisia. The authors use GARCH(1.1) specification by incorporation the surprise component in the estimated model during the period from January 1, 2019 until December 31, 2020. The empirical findings show that the evolution of the daily returns and volatilities of the stock market index in Tunisia show very significant peaks in their evolutions in particular during the first three months of 2020 during the most significant spread of the COVID-19 pandemic. The authors show that the announcements of the new cases of COVID-19 in the United States have a significant impact on the volatility of financial markets in Tunisia. This chapter is the first paper that examines the effect of surprises from financial markets announcements relating to new, confirmed, and death cases of COVID-19 on the volatility of financial markets in Tunisia.