Abstract
Given the effects COVID-19 pandemic on the financial sectors across the world, this study examined the reaction of stock returns of 201 firms listed in the Nigerian Stock Exchange to the COVID-19 pandemic and lockdown policy. We deployed both Pooled OLS and Panel VAR as estimation methods. Generally, the results from POLS show the stock market returns of the Nigerian firms reacted negatively more to the global COVID-19 confirmed cases and deaths than the domestic COVID-19 confirmed cases and deaths and lockdown policy. The results of the impulse response functions revealed that the effects of COVID-19 confirmed cases and deaths and lockdown policy shocks on stock returns oscillate between negative and positive before the stock market returns converge to the equilibrium in the long run. The FEVD results showed that growth in the COVID-19 confirmed cases, deaths and lockdown policy shocks explained little variations in stock market returns. Given our finding, we advocate for the relaxation of policy of lockdown and the combine use of monetary and fiscal policies to mitigate the negative effect of COVID-19 pandemic on stock market returns in Nigeria.
Highlights
This study investigates the response of stock market returns to COVID-19 pandemic shocks and lockdown policy using 201 Nigerian firms’ data
The broad objective of this study is to primarily investigate the response of stock returns of 201 firms listed in Nigeria stock exchange to the COVI9-19 pandemic and lockdown policy measure
With regard to the results of impact of lockdown policy on stock market returns, we found that lockdown policy negatively and significantly impacts stock market returns with estimated coefficient of impact standing at 0.024%
Summary
This study investigates the response of stock market returns to COVID-19 pandemic shocks and lockdown policy using 201 Nigerian firms’ data. Since the WHO’s declaration, governments across the world have put several measures in place to contain the spread of the virus. Some of these measures include washing of hands with soap, sanitisation of the handson regular basis, wearing of nose mask in public places, banning of all socioeconomic, political and religious gathering, restriction of movement within regions and states, banning of international travel, physical and social distancing and total lockdown of the economy [39]. The policy measures may sound good as they contain the health risks; the economic implications of some them have begun to manifest in different countries, both developed and developing countries
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