DYNAMICS OF GLOBAL INDICES IN RESPONSE TO COVID-19

Abstract

Study Area: Economic activities all over the globe have slowed down suddenly because of rapid spread of COVID-19 and stock markets are no exception to this. This study focuses on how the stock markets have responded to the variations in economic parameters like industrial production and Gross Domestic Product (GDP) with the increase in COVID-19 cases in the top six affected countries across the globe.

Sample: To examine this, the top six economies in the globe that were seriously affected because of the pandemic and the major indices in the respective countries have been measured. A sample of 18 months' fluctuations data (intraday/closing prices data) of these indices is considered along with severe COVID-19 cases, industrial production, and the GDP of the respective countries during the period.

Period: To have an impact full study the total data has been divided into three segments ‘P’ nearly six months before the ‘V’ shape fluctuation in indices from 01-July-2019 to 31-Dec-2019 (before the pandemic crash), ‘Q’ represents a period of ‘V’ shape from 01-Jan-2020 to 30-June-2020 and ‘R’ represents after ‘V’ shape from 01-June-2020 to 31-Dec-2020 (period where majority indices shown a trend of recovery) considered for the study.

Tools and Analysis: Apart from the Mean and volatility of all the variables considered for the study, the article also provides evidence and insights about the Cross-correlations to know the relation and direction of the returns of six indices in three periods, and Multiple regression applied in the study in order to understand the cause-and-effect relation between the independent variables such as number of Covid-19 cases, industrial production and the GDP on stock market returns in P, Q and R periods.