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http://dx.doi.org/10.13106/jafeb.2022.vol9.no4.0173

The COVID-19 Pandemic and Instability of Stock Markets: An Empirical Analysis Using Panel Vector Error Correction Model  

ABDULRAZZAQ, Yousef M. (Department of Economics and Finance, Gulf University for Science and Technology)
ALI, Mohammad A. (Department of Economics and Finance, Gulf University for Science and Technology)
ALMANSOURI, Hesham A. (Systems and Software development department, Kuwait Institute for Scientific Research)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.4, 2022 , pp. 173-183 More about this Journal
Abstract
The objective of this research is to examine the influence of the COVID-19 pandemic on stock markets in a few developing and developed countries. This study uses daily data from January 2020 to May 2021 and obtained from World Health Organization and Thomson Reuters. The secondary data was evaluated through panel econometric methodology that includes different unit root tests, and to analyze the long-run relationship between variables, panel cointegration techniques were applied. The long-run causality among variables was examined through Panel Vector Error Correction Model. The overall findings of this study suggest a long-run association exists between several cases and death with the stock returns of the GCC and other stock markets. Furthermore, the VECM model also identified a long-run causality running from COVID cases and death towards the stock rerun of both sets of stock markets. However, a subsequent Wald test yielded mixed results, indicating no short-run causality between cases and deaths and stock returns in both groups; however, in the case of GCC, several COVID-19 cases are having a causal impact on stock markets, which is notable in light of the fact that the death rate in GCC is significantly lower than in many developed and developing countries.
Keywords
COVID-19; Stock Returns; Pedroni; VECM; Panel Data;
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