Pandemics and stock markets reactions: a panel analysis of emerging markets
African Journal of Economic and Management Studies
ISSN: 2040-0705
Article publication date: 10 May 2022
Issue publication date: 11 October 2022
Abstract
Purpose
Pandemics and infectious diseases are almost becoming part of everyday human lives. In this study, the authors model the historical impact of pandemics on the various aspect of the stock market performance.
Design/methodology/approach
The Arellano and Bond (1991) GMM is used in estimating the empirical model to help solve possible endogeneity, heteroscedasticity and serial correlation problems in static panel data problems. Particularly, the system GMM is used to control for both the levels and the first difference equations.
Findings
The findings indicate that pandemics reduce the stock market turnover and the value of stock traded. But the stock market capitalization and the number of stock listings will not be affected within the pandemic period. Also, the authors report that the actual impact of the pandemic in terms of the number of people who die from the disease will badly influence all the four indicators of the stock market performances.
Research limitations/implications
This study opens up the frontiers to the use of panel modeling in this area of study which will influence future studies. Additionally, the authors have showcased that the number of deaths from communicable diseases (pandemics) disrupts all four measures of stock markets performance indicators; this finding will guide policymakers to develop a robust approach to fighting pandemics when they occur.
Originality/value
The study is unique in two ways. Unlike recent studies that focus on only the impact of Covid-19 on stock market performance, the authors build a 20-year panel of 41 emerging economies to capture the long-run dynamics. Again, the authors’ variables can capture the immediate and cumulative response of stock market performance to pandemics.
Keywords
Citation
Yiadom, E.B. and Abdul-Mumuni, A. (2022), "Pandemics and stock markets reactions: a panel analysis of emerging markets", African Journal of Economic and Management Studies, Vol. 13 No. 4, pp. 636-650. https://doi.org/10.1108/AJEMS-12-2021-0528
Publisher
:Emerald Publishing Limited
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