THE EFFECT OF COVID-19 PANDEMIC ON THE RISKS OF INVESTMENTS IN INDONESIA: EVIDENCE FROM THE EGARCH MODEL

Abstract

This study analyzes the effect of the COVID-19 pandemic on the risks of gold, stocks, and the US dollar investments as well as risk comparison among those instruments. An EGARCH model is used to accommodate the asymmetric effect on the risks. To examine the pandemic effect, we use a dummy variable of before and during the pandemic and stringency index which reflects government seriousness about COVID-19 prevention. The results show that risks are higher during the pandemic while government actions reduce risks. Stocks are riskiest instrument and suitable for risk seekers. Gold is least risky and suitable for risk averters.