CORONAVIRUS (COVID-19) AND STOCK MARKETS: THE EFFECTS OF THE PANDEMIC ON THE GLOBAL ECONOMY

Year 2020, Volume: 7 Issue: 4, 1 - 16, 30.04.2020

Zekai Şenol , Feyyaz Zeren

Abstract

The novel coronaviris (COVID-19) virus, which emerged in Wuhan City, Hubei Province of China, spread to other countries over time and was declared a global epidemic by the World Health Organization (WHO) on March 11, 2020. With the epidemic, curfews were imposed, workplaces closed, production decreased, shopping stopped, except for basic supplies. COVID-19 endangered human health as well as increased risk perception in financial markets. Large decreases occurred in stock markets in a short time, companies lost value, stock prices dropped. In this study, it was investigated that the effect of COVID-19 outbreak on global markets between January 21, 2020 and April 7, 2020. Global markets are represented by MSCI’ World, emerging market, European and G7 indices. In the study where Fourier Cointegration test was applied, it was detected that a long-term relationship between stock markets and COVID-19.

Keywords

Coronavirus, COVID-19, Stock Exchanges, MSCI, Fourier

References

• Armien, B., Suaya, J. A., Quiroz, E., Sah, B. K., Bayard, V., Marchena, L. and Shepard, D. S. (2008). Clinical Characteristics and National Economic Cost of the 2005 Dengue Epidemic in Panama. The American journal of Tropical Medicine and Hygiene. 79(3), 364-371. 20.03.2020.
• Ayittey, F. K., Ayittey, M. K., Chiwero, N. B., Kamasah, J. S., and Dzuvor, C. (2020). Economic Impacts of Wuhan 2019‐nCoV on China and the World. Journal of Medical Virology.
• Becker, R. Enders, W. and Lee, J. (2006). A Stationary Test in the Presence of an Unknown Number of Smooth Breaks. Journal of Time Series Analysis, 27, 3, 381-409.
• Beşel, F. and Uygun, U. (2017). The Relationship Between Economic Growth and Tourism Income: The Case of Turkey. 3rd SCF International Conference on “Economic and Social Impacts of Globalization”, Antalya, 5-7 October.
• Bloom, D. E., and Mahal, A. S. (1997). Does the AIDS Epidemic Threaten Economic Growth?. Journal of Econometrics, 77(1), 105-124.
• Chen, C.-D., Chen, C.-C., Tang, W.-W. and Huang, B.-Y. (2009). The Positive and Negative Impact of the SARS Outbreak: A Case of the Taiwan Industries. The Journal of Developing Areas, 281-293.
• Chen, M-P., Lee, C.C., Lin, Y-H. and Chen, W-Y. (2018). Did the SARS Epidemic Weaken the Integration of Asian Stock Markets? Evidence from Smooth Time_Varying Cointegration Analyisis. Economic Research. 31(1), 908-926.
• Çil Yavuz, N. (2015). Finansal Ekonometri, Der Yayınları, Istanbul.
• Edu-Afful, F. (2019). Deconstructing Ebola in West Africa: Options for Future Response. https://www.tandfonline.com/doi/abs/10.1080/17502977.2018.1493840?journalCode=risb20 23.03.2020
• Estrada, M. A. R. and Park, D. (2020). The Economic Impact of Massive Infectious and Congagious Diseases: The Case of Wuhan Coronavirus. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3533771 20.03.2020
• Gethmann, J., Probst, C., and Conraths, F. J. (2020). Economic Impact of a Bluetongue Serotype 8 Epidemic in Germany. Frontiers in Veterinary Science, 7, 65, 1-12
• Giudice, A. D. and Paltrinieri, A. (2017). The Impact of the Arab Spring and the Ebola Outbreak on African Aquity Mutual Fund Investor Decisions. Research in International Business and Finance. 41, 600-6012.
• Ichev, R. and Marinc, M. (2018). Stock Prices and Geographic Procximity of Information: Evidence from the Ebola Outbreak. International Review of Financial Analysis. 56, 153-166.
• Kwiatkowski D., Phillips P. C. B., Schmidt P and Shin Y. (1992). Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root. J Econom, 54, 159-178.
• Loh, E. (2006). The Impact of SARS on the Performance and Risk Profile of Airline Stocks. International Journal of Transport Economics. 33(2), 401-422.
• Luo, S., and Tsang, K. P. (2020). How Much of China and World GDP Has The Coronavirus Reduced?. Available at SSRN 3543760. https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3543760 20.03.2020
• Mann, C. (2020). Real and Financial Lenses to Assess the Economic Consequences of COVIS-19. Economics in the Time of Covid-19. Edit. Baldwin, R. and Mauro, B. W. Cepr Press. UK.
• McKibbin, W. and Fernando, R. (2020). The Global Macroeconomic Impacts of COVID-19: Seven Scenarios. https://www.brookings.edu/wp-content/uploads/2020/03/20200302_COVID19.pdf
• Nippani, S. and Washer, K. M. (2004). SARS: a Non-Event for Affected Countries' Stock Markets?. Applied Financial Economics, 14(15), 1105-1110
• Pendell, D. L., and Cho, C. (2013). Stock Market Reactions to Contagious Animal Disease Outbreaks: An Event Study in Korean Foot‐and‐Mouth Disease Outbreaks. Agribusiness, 29(4), 455-468.
• Pérez-Guerra, C. L., Halasa, Y. A., Rivera, R., Peña, M., Ramírez, V., Cano, M. P., and Rico, P. (2010). Economic Cost of Dengue Public Prevention Activities in Puerto ico. https://apps.who.int/iris/handle/10665/170983
• Shin Y. (1994) A Residual-Based Test of the Null of Cointegration against the Alternative of no Cointegration. Econom Theory 10 (1), 91–115.
• Qiu, W., Chu, C., Mao, A. and Wu, J. (2018). The Impact on Healty, Society, and Economy of SARS and H7N9 Outbreaks in China: A Case Comparison Study. Journal of Environmental and Public Healty. 1-9.
• UNCTADa (2020). The Covid-19 Shock to Developing Countries. https://unctad.org/en/PublicationsLibrary/gds_tdr2019_covid2_en.pdf 04.04.2020
• UNCTADb. (2020). Impact of the Coronavirus Outbreak on Global FDI. https://unctad.org/en/PublicationsLibrary/diaeinf2020d2_en.pdf 21.03.2020
• UNCTADc. (2020). The Coronavirus Shock: A Story of Another Global Crisis Foretold and What Policymakers should be doing about It. https://unctad.org/en/PublicationsLibrary/gds_tdr2019_update_coronavirus.pdf 21.03.2020
• Tsong, C. C., Lee, C, F, Tsai, L. J. and Hu, T. C. (2015). The Fourier Approximation and Testing for the Null of Cointegration, Empirical Economics 51 (3): 1085–1113. Doi: 10.1007/s00181-015-1028-6.
• WHO (2020). Novel Coronavirus (2019-nCoV) Situation Report - 1, https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports/ 20.03.2020
• Yılancı, V., Aslan, M. and Özgür, Ö. (2017). Testing the Validity of PPP Theory for African Countries, Applied Economics Letters, DOI: 10.1080/13504851.2017.1418066
• Zeren, F. and Hizarci, A. E. (2020). The Impact of COVID-19 Coronavirus on Stock Markets: Evidence from Selected Countries. Bulletin of Accounting and Finance Reviews. 3(1), 78-84.