Investigating Efficiencies in Financial Markets and the Spillover Effects of COVID-19: Evidence from the Most Affected Countries

  • Maryam International Islamic University Islamabad, Islamabad, Pakistan
  • Sumaira Ghaffar International Islamic University Islamabad, Islamabad, Pakistan
  • Sonia Bibi International Islamic University Islamabad, Islamabad, Pakistan
  • Sidra Gazali Arid Agriculture University Rawalpindi, Rawalpindi, Pakistan
  • Dr. Asma Zeeshan Bahria University Islamabad, Islamabad, Pakistan
Keywords: Market efficiency, Financial markets, Stock markets, COVID-19

Abstract

This study examines the volatility transmission of COVID-19 to different financial markets, specifically oil, gold, Bitcoin, and the stock market, in the countries with the highest number of coronavirus-infected cases reported. The sample includes China, Italy, the U.K., and the U.S., and the sample period is January 2, 2020, to June 30, 2020. The garch-in-mean test has been utilized to examine the volatility transmission, and the results show that COVID-19 negatively affects the gold returns in China, Italy, and the U.S. The spillover transmission of the pandemic has also extended to the stock markets in China, Italy, and the U.S., negatively affecting returns. The spillover to the oil market is positive and only significant for the U.K. In cryptocurrencies, Bitcoin returns are negatively affected as a response to the volatility spillover in the U.K. Market efficiency has also been investigated in the aforementioned financial markets through the JarqueBera statistic, autocorrelation test, unit root tests, and multiple variance ratio test. Most of the tests reflect the inefficiency in almost all of the markets of the selected sample. Most of the markets have proven to be inefficient. The findings have significant implications for market participants and policymakers in understanding how sensitive financial markets are to the pandemic, which will help develop appropriate and required response mechanisms.

Published
2023-07-28
How to Cite
Maryam, Sumaira Ghaffar, Sonia Bibi, Sidra Gazali, & Dr. Asma Zeeshan. (2023). Investigating Efficiencies in Financial Markets and the Spillover Effects of COVID-19: Evidence from the Most Affected Countries. Journal of Management Practices, Humanities and Social Sciences, 7(4), 44-61. https://doi.org/10.33152/jmphss-7.4.5
Section
Articles