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Journal of Economic Integration 2021 March;36(1) :20-45.
DOI: https://doi.org/10.11130/jei.2021.36.1.20
Impact of COVID-19 on Global Stock Market Volatility

Teresia Angelia KusumahadiFikri C Permana 

Atma Jaya Catholic University of Indonesia, Indonesia
Corresponding Author: Teresia Angelia Kusumahadi ,Email: teresia.kusumahadi@atmajaya.ac.id
Copyright ©2021 Journal of Economic Integration
ABSTRACT
This study aims to examine the impact of COVID-19 on stock return volatility in 15 countries worldwide. Using daily data from January 2019 to June 2020, we find that changes in exchange rates have negatively affected stock returns in most countries. We also identify structural changes over the observation period; these structural changes occur not just after the first case of COVID-19 but also earlier in the period. Based on threshold generalized autoregressive conditional heteroskedasticity regressions, we find evidence that the emergence of COVID-19 affected stock return volatility in all observed countries except the United Kingdom. Furthermore, we find that the presence of COVID-19 in a country positively affects return volatility. However, the magnitude of this effect is small in every observed country. This finding suggests the need for in-depth studies of other factors that affect stock return volatility besides the occurrence of COVID-19.

JEL Classification
C58: Financial Econometrics
F36: Financial Aspects of Economic Integration
F65: Finance
G15: International Financial Markets
Keywords: COVID-19; stock return; volatility; structural change; ordinary least squares; threshold generalized autoregressive conditional heteroskedasticity model
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