What do we know about COVID-19 media coverage and African stock markets? A time-varying connectedness analysis

Abstract

ABSTRACT In this study, we explore the role of media coverage in the connectedness between African stock markets during the COVID-19 pandemic. Using the time-varying parameter autoregression connectedness metric and the Media Coverage Index (MCI), we analyse return and volatility connectedness between African stocks from January 2020 to October 2022. Our findings reveal that the MCI significantly drives risk transmission and financial market contagion from the global market to African markets. We document a peak in return (volatility) connectedness at 73% (55%) during the height of the pandemic in March 2020. The MCI transmits return shocks to all African stock markets except South Africa and Botswana, and volatility spillovers to all African markets. Our analysis suggests potential diversification attributes for stocks from Ghana, Mauritius, and Nigeria, which are strictly net receivers throughout the pandemic period. These findings have important implications for risk management, asset allocation, and market regulation decisions.