Spillovers of Political Instability and Covid 19 Pandemic Crisis on Tunisian Sectorial Stock Price Returns

Abstract

To examine the effects of Political instability (PI) and Covid-19 pandemic crisis measured by death rate (DR) on Tunisian sectorial stock market returns, our paper contributes to the financial literature by providing a new study of these effects based on DCC multivariate GARCH. These effects are specially examined in mean and variance returns equations. Our results show a not significant negative effect of both variables under study in mean but significant coefficients of IP and DR in variance equation. Despite the COVID-19 pandemic crisis positively impacts the investor’s fear sentiments; the conditional volatility of all sectorial stock market returns is higher in political instability period leading high-level risk in Tunisian stock market. Our findings offer useful policy and financial implications to the policy makers also to firms, investors and all stakeholders of the Tunisian stock market