COVID-19 pandemic and financial market volatility: A quantile regression approach

Sabeeh Ullah; Sumaira Khan; Nazia Iqbal Hashmi; Md Shabbir Alam

doi:10.1016/j.heliyon.2023.e21131

COVID-19 pandemic and financial market volatility: A quantile regression approach

Heliyon. 2023 Oct 17;9(10):e21131. doi: 10.1016/j.heliyon.2023.e21131. eCollection 2023 Oct.

Authors

Sabeeh Ullah¹, Sumaira Khan², Nazia Iqbal Hashmi³, Md Shabbir Alam⁴

Affiliations

¹ Institute of Business and Management Sciences (IBMS), Faculty of Management & Computer Sciences (FMCS), The University of Agriculture, Peshawar, Pakistan.
² Department of Management Sciences, Women University, Swabi, Pakistan.
³ Department of Finance, College of Business Administration, Prince Sultan University, Riyadh, Saudi Arabia.
⁴ Department of Economics and Finance, College of Business Administration, University of Bahrain, Sakhir, Bahrain.

Abstract

The study examined the nexus between the COVID-19 pandemic and the market volatility of the global markets. For this purpose, a 30-country sample was used based on the most COVID-19 cases and deaths during the study period, from January 1 to December 12, 2020. We employed panel quantile regression and Panel Estimated Generalized Least Square (Panel-EGLS) frameworks to analyze the influence of COVID-19 on volatility in the whole sample and subsamples of emerging and developed markets. Our results of Panel-EGLS showed that the new cases and deaths positively impact volatility in the naïve and control models. The results from quantile regression also illustrated that new deaths and cases have positively influenced market volatility at the 50th and 75th quantiles. From the subsamples, our results demonstrate almost similar signs and significance for the impact of COVID-19 on market volatility in developed and emerging markets in both the naïve and control models. Both the results illustrate that any increase in COVID-19 positively caused volatility in the whole and subsamples at the mean and upper quantile levels. Our results necessitate coordinated global government actions to stabilize markets, mitigate volatility's impact by proactive policies in future health crises, and underscore a monetary policy for stability.

Keywords: COVID-19 pandemic; Financial markets; Quantile regression; Volatility.