Abstract
The main objective of this study is to check short term stress of COVID-19 on the American, European, Asian, and Pacific stock market indices, furthermore, the correlation between all the stock markets during the pandemic. Secondary data of 41 stock exchange from 32 countries have been collected from investing.com website from 1st July 2019 to 14th May 2020 for the stock market and the COVID-19 data has been collected according to the first cases reported in the country, stocks market are classified either developed or emerging economy, further divided according to the subcontinent i.e. America, Europe, and Pacific/Asia, the main focus in the data is the report of first COVID-19 cases. The study reveals that there is volatility in the all the 41 stock market (American, Europe, Asia, and Pacific) after reporting of the first case and volatility increase with the increase of COVID-19 cases, moreover, there is a significant negative relationship between the number of COVID-19 cases and 41 major stock indices of American, Europe, Asia and Pacific, European subcontinent market found more effected from the COVID-19 than another subcontinent, there is Clustering effect of COVID-19 on all the stock market except American's stock market due to smart capital investing.
Highlights
Coronavirus is known as COVID-19 which affects the Wuhan, China in December 2019 and became the cause of the crisis in Hubei China and for the rest of the world, all of sudden COVID-19 became a global pandemic
Panel 3 categorized one European based indexes, interestingly RTSI (Russia) and Budapest SE (Hungary) did not have any significant impact on the % change in Covid-19 cases with stock market return perhaps the had some smart policy to deal with the global pandemic, but rest of the entire European region capital markets are badly damaged by the virus pandemic that what was analyzed in the above-mentioned segment in the correlation matrix, we have further examined the effected indexes by assigning them ranks according to their Coefficients driven from linear regression model as below
In every individual phase of this research paper, we found European market is the most affected market by the Covid-19 and most of the indexes are in the developed market comes under European region, we needed to hypothesize the Covid-19 clustering effect on Developed and Emerging Market collectively, before this segment we analysis the market on an individual basis by using regression and Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) Model, but in this segment, we have averaged out the daily return of each index and plugged this into the respective category and created single indexes for developed and emerging markets
Summary
Coronavirus is known as COVID-19 which affects the Wuhan, China in December 2019 and became the cause of the crisis in Hubei China and for the rest of the world, all of sudden COVID-19 became a global pandemic. The entire world faced volatility in the stock market and a significant decline in the equity market. This is the biggest volatility level seen in the United State stock market after October 1987 and December 2008. The COVID-19 has significant effect the world economy in short term as well as in the long term, in shorter-term consequence is limited activity in the economy due to strict lockdown, in the longer-term impact of the COVID-19 many small businesses will be closed and unemployment will be increased, the number of industries will suffer i.e. tourism airlines and hotels The COVID-19 has significant effect the world economy in short term as well as in the long term, in shorter-term consequence is limited activity in the economy due to strict lockdown, in the longer-term impact of the COVID-19 many small businesses will be closed and unemployment will be increased, the number of industries will suffer i.e. tourism airlines and hotels (Zhang, D., Hu, M., & Ji, Q. 2020)
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