The performance of the Indian stock market during COVID-19
-
DOIhttp://dx.doi.org/10.21511/imfi.17(3).2020.11
-
Article InfoVolume 17 2020, Issue #3, pp. 133-147
- Cited by
- 2825 Views
-
758 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The current empirical study attempts to analyze the impact of COVID-19 on the performance of the Indian stock market concerning two composite indices (BSE 500 and BSE Sensex) and eight sectoral indices of Bombay Stock Exchange (BSE) (Auto, Bankex, Consumer Durables, Capital Goods, Fast Moving Consumer Goods, Health Care, Information Technology, and Realty) of India, and compare the composite indices of India with three global indexes S&P 500, Nikkei 225, and FTSE 100. The daily data from January 2019 to May 2020 have been considered in this study. GLS regression has been applied to assess the impact of COVID-19 on the multiple measures of volatility, namely standard deviation, skewness, and kurtosis of all indices. All indices’ key findings show lower mean daily return than specific, negative returns in the crisis period compared to the pre-crisis period. The standard deviation of all the indices has gone up, the skewness has become negative, and the kurtosis values are exceptionally large. The relation between indices has increased during the crisis period. The Indian stock market depicts roughly the same standard deviation as the global markets but has higher negative skewness and higher positive kurtosis of returns, making the market seem more volatile.
- Keywords
-
JEL Classification (Paper profile tab)G10, G11, G12, G14
-
References31
-
Tables7
-
Figures21
-
- Figure 1. Frequency and normal distribution of stock returns during the crisis period and the pre-crisis period
- Figure 1(a). BSE 500 (August – December 2019)
- Figure 1(b). BSE Sensex (August – December 2019)
- Figure 1(c). BSE Automobiles (August – December 2019)
- Figure 1(d). BSE Bankex (August – December 2019)
- Figure 1(e). BSE Consumer Durables (August –December 2019)
- Figure 1(f). BSE Capital Goods (August – December 2019)
- Figure 1(g). BSE Fast Moving Consumer Goods (August – December 2019)
- Figure 1(h). BSE Health Care (August – December 2019)
- Figure 1(i). BSE Information Technology (August –December 2019)
- Figure 1(j). BSE Realty (August – December 2019)
- Figure 1(k). BSE 500 (January – May 2020)
- Figure 1(l). BSE Sensex (January – May 2020)
- Figure 1(m). BSE Automobiles (January – May 2020)
- Figure 1(n). BSE Bankex (January – May 2020)
- Figure 1(o). BSE Consumer Durables (January –May 2020)
- Figure 1(p). BSE Capital Goods (January –May 2020)
- Figure 1(q). BSE Fast Moving Consumer Goods (January – May 2020)
- Figure 1(r). BSE Health Care (January – May 2020)
- Figure 1(s). BSE Information Technology (January –May 2020)
- Figure 1(t). BSE Realty (January – May 2020)
-
- Table 1. Descriptive statistics
- Table 2. Highlights of periodic returns
- Table 3. Correlation matrix
- Table 4. Regression analysis: model 1 – for COVID-19 and standard deviation of the index returns
- Table 5. Regression analysis: model 2 – for COVID-19 and skewness of the index returns
- Table 6. Regression analysis: model 3 – for COVID-19 and kurtosis of the index returns
- Table 7. Regression analysis – comparing BSE 500 with global market indices (Model 1 – Model 3)
-
- Akter, N., & Nobi, A. (2018). Investigation of the financial stability of S&P 500 using realized volatility and stock returns distribution. Journal of Risk and Financial Management, 11(2), 22.
- Al-Awadhi, A. M., Al-Saifi, K., Al-Awadhi, A., & Alhamadi, S. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27, 100326.
- Albulescu, C. (2020). Coronavirus and financial volatility: 40 days of fasting and fear. arXiv preprint arXiv:2003.04005.
- Alfaro, L., Chari, A., Greenland, A. N., & Schott, P. K. (2020). Aggregate and firm-level stock returns during pandemics, in real time (No. w26950). National Bureau of Economic Research.
- Ang, A., & Liu, J. (2007). Risk, return, and dividends. Journal of Financial Economics, 85(1), 1-38.
- Anjorin, A. A. (2020). The coronavirus disease 2019 (COVID-19) pandemic: A review and an update on cases in Africa. Asian Pacific Journal of Tropical Medicine, 13(5), 199.
- Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: cases or fatalities? Research in International Business and Finance, 54, 101249.
- Ayittey, F. K., Ayittey, M. K., Chiwero, N. B., Kamasah, J. S., & Dzuvor, C. (2020). Economic impacts of Wuhan 2019-nCoV on China and the world. Journal of Medical Virology, 92(5), 473-475.
- Baker, S., Bloom, N., Davis, S. J., Kost, K., Sammon, M., & Viratyosin, T. (2020). The unprecedented stock market reaction to COVID-19. Covid Economics: Vetted and Real-Time Papers, 1(3), 1-22.
- Bakhshi, P., & Chaudhary, R. (2020). Responsible Business Conduct for The Sustainable Development Goals: Lessons from Covid-19. International Journal of Disaster Recovery and Business Continuity, 11(1), 2835.
- Boot, A. W., Carletti, E., Kotz, H. H., Krahnen, J. P., Pelizzon, L., & Subrahmanyam, M. G. (2020). Corona and financial stability 4.0: Implementing a european pandemic equity fund (No. 84). SAFE Policy Letter.
- Chang, B. Y., Christoffersen, P., & Jacobs, K. (2013). Market skewness risk and the cross section of stock returns. Journal of Financial Economics, 107(1), 46-68.
- Chaudhary, R., Misra, D., & Bakhshi, P. (2020). Conditional relation between return and co-moments–an empirical study for emerging Indian stock market. Investment Management and Financial Innovations, 17(2), 308-319.
- FAZ. (2020). Düstere Vorhersage des IWF: Die größte Krise seit der Großen Depression.
- Feinstein, M. M., Niforatos, J. D., Hyun, I., Cunningham, T. V., Reynolds, A., Brodie, D., & Levine, A. (2020). Considerations for ventilator triage during the COVID-19 pandemic. The Lancet. Respiratory Medicine, 8, e53.
- Fernandes, N. (2020). Economic effects of coronavirus outbreak (COVID-19) on the world economy.
- Glosten, L. R., Jagannathan, R., & Runkle, D. E. (1993). On the relation between the expected value and the volatility of the nominal excess return on stocks. The Journal of Finance, 48(5), 1779-1801.
- Gourinchas, P. O. (2020). Flattening the pandemic and recession curves. Mitigating the COVID Economic Crisis: Act Fast and Do Whatever, 31.
- Green, T. C., & Figlewski, S. (1999). Market risk and model risk for a financial institution writing options. The Journal of Finance, 54(4), 1465-1499.
- Hoshi, T., & Kashyap, A. K. (2004). Japan’s financial crisis and economic stagnation. Journal of Economic Perspectives, 18(1), 3-26.
- Levine, R., & Zervos, S. (1999). Capital control liberalization and stock market development. The World Bank.
- Megginson, W. L., & Fotak, V. (2020). Government Equity Investments in Coronavirus Rescues: Why, How, When?
- Mei, D., Liu, J., Ma, F., & Chen, W. (2017). Forecasting stock market volatility: Do realized skewness and kurtosis help? Physica A: Statistical Mechanics and its Applications, 481, 153-159.
- Michelsen, C., Baldi, G., Dany-Knedlik, G., Engerer, H., Gebauer, S., & Rieth, M. (2020). Coronavirus Pandemic Plunging Global Economy into a Serious Recession: DIW Economic Outlook. DIW Weekly Report, 10(24/25), 280-282.
- Okhuese, A. V. (2020). Estimation of the Probability of Reinfection with COVID-19 by the Susceptible-Exposed-Infectious-Removed-Undetectable-Susceptible Model. JMIR Public Health and Surveillance, 6(2), 19097.
- Onvista. (2020). MSCI World Index: Kurs, chart news.
- Ruiz Estrada, M. A. (2020). Economic Waves: The Effect of the Wuhan COVID-19 On the World Economy (2019–2020).
- Thadewald, T., & Büning, H. (2007). Jarque–Bera test and its competitors for testing normality–a power comparison. Journal of Applied Statistics, 34(1), 87-105.
- Totir, F., & Dragotă, I. M. (2011). Current Economic and Financial Crisis-New Issues or Returning to the Old Problems? Paradigms, Causes, Effects and Solutions Adopted. Theoretical and Applied Economics, 0(1(554)), 129-150.
- Yousef, I. (2020). The Impact of Coronavirus on Stock Market Volatility.
- Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 101528.