The structure of the South African stock market network during COVID-19 hard lockdown

Abstract

This study investigates the topology of the South African stock market network pre, during, and post the level 5-lockdown period. We use the daily closing price of the 134 companies in the all-share index (ALSI) from 01 October 2019 to 30 October 2020. We construct the minimum spanning tree using the cross-correlation of the returns computed from the closing price data. The research findings show that the South African stock market network forms clusters and is homogeneous, and the finance industry plays a central role. Specifically, the results show an expansion of MST during the level 5 lockdown and shrinkage of the MST post level 5 lockdown. The average correlation coefficient decreases through all sub-periods; conversely, the average distance increases in all sub-periods. Post-level 5 lockdown period, stocks in the Health Care Equipment & Services sector form a small cluster that did not exist before the lockdown period. JSE node degree distribution for all sub-periods follows the power law.