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

Sivaprasad, S., Muradoglu, Y.G., Izzeldin, M and Pappas, V 2021. The impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model. International Review of Financial Analysis.

TitleThe impact of Covid-19 on G7 stock markets volatility: Evidence from a ST-HAR model
TypeJournal article
AuthorsSivaprasad, S., Muradoglu, Y.G., Izzeldin, M and Pappas, V
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.

KeywordsCovid-19, financial markets, HAR model, smooth transition, business sectors
JournalInternational Review of Financial Analysis
ISSN1057-5219
Year2021
PublisherElsevier
Publisher's version
File Access Level
Open (open metadata and files)

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