AN ANALYSIS TO DETERMINATE THE IMPACT OF COVID-19 ON WORLD FINANCIAL MARKETS

Abstract

In this study, it was analysed to determine whether the coronavirus, which became a global epidemic by affecting the whole world in a short time, caused any changes in the volatility and liquidity of stock market indices in the USA, Germany, China, Japan, Egypt, and Turkey. In this context, the effects of the coronavirus epidemic on DOW30 Index in USA, DAX Index in Germany, SSE Composite Shanghai Index in China, NIKKEI 225 Index in Japan, EGX30 Index in Egypt and BIST100 Index in Turkey were investigated. The results and estimations of the study were limited to the relevant countries, and this was the limitation of the study. Selected countries for the analysis were determined by their locational and financial market properties among developed and developing countries which were the most representative ones. The date of the first case for each country announced by WHO was taken as a basis date. A data set was prepared for the period from the first case had been seen to 18 November 2020 for each country. In order to determine the pre-pandemic and post-pandemic differentiation, a pre-pandemic period data set was created as well as the same amount of data. Thus, it was tried to determine whether there was a differentiation for the period before and after the pandemic. The return and liquidity series of the indices were estimated with GARCH(1,1), one of the conditional variance models, and it was observed that there were changes in the volatility and liquidity of the relevant stock market indices after COVID-19. In addition, volatility clusters were observed. Return series of all country stock market indices which were the subject of the research had determined to have thick tail and skewness features like classical financial time series.