The impact of Covid-19 on G7 stock markets volatility : Evidence from a ST-HAR model

Izzeldin, Marwan and Muradoglu, Gulnur and Pappas, Vasileios and Sivaprasad, Sheeja (2021) The impact of Covid-19 on G7 stock markets volatility : Evidence from a ST-HAR model. International Review of Financial Analysis, 74: 101671. ISSN 1057-5219

Text (Covid19 Financial markets paper v8-6-20)
Covid19_Financial_markets_paper_v8_6_20.pdf - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.
Download (455kB)

Abstract

We investigate the impact of Covid-19 on stock markets across G7 countries and their business sectors. We highlight the synchronicity and severity of this unprecedented crisis. We find strong transition evidence to a crisis regime in all countries and sectors, yet crisis intensity and timings vary. The Health Care and Consumer services sectors were the most severely affected; a reflection of the Covid-19 drug-race and international travel restrictions. The Technology sector was hit the latest and least severely, as imposed lockdown measures forced people to explore various web-based entertainment and distraction options. Country-wise the UK and the US were the most affected with the highest heterogeneity in their business sectors' response; a possible reflection of the ambiguity in the initial response and adoption of lockdown measures. Financial markets' response to Covid-19 is akin to response in previous financial crisis rather than previous pandemics. A series of robustness checks confirms our findings.