The nexus between COVID-19 fear and stock market volatility

• Published in: Economic research - Ekonomska istraživanja Vol. 35; no. 1; pp. 1765 - 1785
• Main Authors: Li, Weiqing, Chien, Fengsheng, Kamran, Hafiz Waqas, Aldeehani, Talla M, Sadiq, Muhammad, Nguyen, Van Chien, Taghizadeh-Hesary, Farhad
• Format: Journal Article Paper
• Language: English
• Published: Pula Routledge 31.12.2022; Taylor & Francis Ltd; Taylor and Francis Group i Sveučilište Jurja Dobrile u Puli, Fakultet ekonomije i turizma Dr. Mijo Mirković
• Subjects: Attention; Coronaviruses; COVID-19; COVID-19 fear; Diversification; Economic theory; Fear & phobias; GDP; Gold markets; Gross Domestic Product; Pandemics; Public opinion; return; Securities markets; Stock exchanges; stock volatility; Volatility; wavelet
• ISSN: 1331-677X; 1848-9664
• DOI: 10.1080/1331677X.2021.1914125

This study described an empirical link between COVID-19 fear and stock market volatility. Studying COVID-19 fear with stock market volatility is crucial for planning adequate portfolio diversification in international financial markets. The study used AR (1) - GARCH (1,1) to measure stock market volatility associated with the COVID-19 pandemic. Our findings suggest that COVID-19 fear is the ultimate cause driving public attention and stock market volatility. The results demonstrate that stock market performance and GDP growth decreased significantly through average increases during the pandemic. Further, with a 1% increase in COVID-19 cases, the stock return and GDP decreased by 0.8%, 0.56%, respectively. However, GDP growth demonstrated a slight movement with stock exchange. Moreover, public attention to the attitude of buying or selling was highly dependent on the COVID-19 pandemic reported cases index, death index, and global fear index. Consequently, investment in the gold market, rather than in the stock market, is recommended. The study also suggests policy implications for key stakeholders.