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COVID-19 and stock returns: Evidence from the Markov switching dependence approach

Ahmed Bouteska, Taimur Sharif, Abedin Abedin

Research in International Business and Finance, Volume: 64, Start page: 101882

Swansea University Author: Abedin Abedin

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DOI (Published version): 10.1016/j.ribaf.2023.101882

Abstract

This paper aims to investigate the regime-switching and time-varying dependence between the COVID-19 pandemic and the US stock markets using a Markov-switching framework. It makes two contributions to the empirical literature by showing that: (a) the variations of the daily reported COVID-19 cases a...

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Published in: Research in International Business and Finance
ISSN: 0275-5319 1878-3384
Published: Elsevier BV 2023
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URI: https://cronfa.swan.ac.uk/Record/cronfa64244
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first_indexed 2023-09-19T13:26:21Z
last_indexed 2023-09-19T13:26:21Z
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spelling v2 64244 2023-08-31 COVID-19 and stock returns: Evidence from the Markov switching dependence approach 4ed8c020eae0c9bec4f5d9495d86d415 Abedin Abedin Abedin Abedin true false 2023-08-31 BAF This paper aims to investigate the regime-switching and time-varying dependence between the COVID-19 pandemic and the US stock markets using a Markov-switching framework. It makes two contributions to the empirical literature by showing that: (a) the variations of the daily reported COVID-19 cases and cumulative COVID-19 deaths induced asymmetric lower (left) and upper (right) tail dependence with the stock markets, and its left and right tail dependence exhibited significant time-varying trends; and (b) the left and right tail dependence between the stock markets and the pandemic exhibited significant regime-switching behaviours, with its switching probabilities in the higher tail dependence stage all being greater than in the lower tail dependence stage after 1 December 2019. Moreover, given that there is concurrent but significant financial market reaction to any unexpected emergence of a transmittable respirational disease or a natural calamity, the outcomes have some vital implications to market players and policymakers. Journal Article Research in International Business and Finance 64 101882 Elsevier BV 0275-5319 1878-3384 COVID-19, Markov regime-switching model, GJR-GARCH model, SJC copula functions, US stock markets 31 1 2023 2023-01-31 10.1016/j.ribaf.2023.101882 http://dx.doi.org/10.1016/j.ribaf.2023.101882 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2023-09-20T10:54:43.4650913 2023-08-31T17:45:52.6216536 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Ahmed Bouteska 1 Taimur Sharif 2 Abedin Abedin 3 64244__28584__6433017e0d934ceab8271b17778cb0b9.pdf 64244.VOR.pdf 2023-09-19T14:23:50.7437921 Output 4150964 application/pdf Version of Record true © 2023 The Authors. Published by Elsevier B.V. Distributed under the terms of a Creative Commons Attribution 4.0 License (CC BY 4.0). true eng https://creativecommons.org/licenses/by/4.0/
title COVID-19 and stock returns: Evidence from the Markov switching dependence approach
spellingShingle COVID-19 and stock returns: Evidence from the Markov switching dependence approach
Abedin Abedin
title_short COVID-19 and stock returns: Evidence from the Markov switching dependence approach
title_full COVID-19 and stock returns: Evidence from the Markov switching dependence approach
title_fullStr COVID-19 and stock returns: Evidence from the Markov switching dependence approach
title_full_unstemmed COVID-19 and stock returns: Evidence from the Markov switching dependence approach
title_sort COVID-19 and stock returns: Evidence from the Markov switching dependence approach
author_id_str_mv 4ed8c020eae0c9bec4f5d9495d86d415
author_id_fullname_str_mv 4ed8c020eae0c9bec4f5d9495d86d415_***_Abedin Abedin
author Abedin Abedin
author2 Ahmed Bouteska
Taimur Sharif
Abedin Abedin
format Journal article
container_title Research in International Business and Finance
container_volume 64
container_start_page 101882
publishDate 2023
institution Swansea University
issn 0275-5319
1878-3384
doi_str_mv 10.1016/j.ribaf.2023.101882
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1016/j.ribaf.2023.101882
document_store_str 1
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description This paper aims to investigate the regime-switching and time-varying dependence between the COVID-19 pandemic and the US stock markets using a Markov-switching framework. It makes two contributions to the empirical literature by showing that: (a) the variations of the daily reported COVID-19 cases and cumulative COVID-19 deaths induced asymmetric lower (left) and upper (right) tail dependence with the stock markets, and its left and right tail dependence exhibited significant time-varying trends; and (b) the left and right tail dependence between the stock markets and the pandemic exhibited significant regime-switching behaviours, with its switching probabilities in the higher tail dependence stage all being greater than in the lower tail dependence stage after 1 December 2019. Moreover, given that there is concurrent but significant financial market reaction to any unexpected emergence of a transmittable respirational disease or a natural calamity, the outcomes have some vital implications to market players and policymakers.
published_date 2023-01-31T10:54:40Z
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