Impact of COVID-19 Pandemic on Financial Markets: a Global Perspective

Abstract

This study aims to examine the influence of the COVID-19 outbreak on daily market returns in most affected developed and emerging markets. For this purpose, panel data of 30 most affected developed and emerging markets over the period January 1, 2020, to December 12, 2020, were analyzed by using panel estimated generalized least square (panel-EGLS) and panel quantile regression approaches. The results confirm that the new COVID-19 daily cases and deaths adversely impact daily market returns around the globe. Also, the positive rate of new COVID-19 cases has also negatively influenced market returns. Further, the number of new COVID-19 daily tests conducted has a positive impact on market returns. Interestingly, the study also found similar impacts for both developed and emerging markets except the news announcement of new COVID-19 daily deaths, which have a positive impact on emerging market returns. The findings of this study present some policy implications for governments to adopt early proactive and control measures to protect financial markets from an adverse decline in future pandemics and to increase investors’ confidence.