The effect of the COVID-19 epidemic on Moroccan sectoral indices: The entropy approach

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The current study investigates the impact of the Coronavirus 2019 (COVID-19) pandemic on the volatility of Moroccan stock market sectoral indices. Shannon entropy with multiple estimators and Rényi entropy for different scales were calculated from February 1, 2019 to May 1, 2022, to measure volatility in the Banking, Oil and Gas, Construction and Building Materials, Beverage, Food Producers and Processors, Distributors, and Mining sector’s indices. In this regard, this study uses three periods to quantify the uncertainty in Moroccan sectoral indices before, during, and after the first year of the COVID-19 pandemic in Morocco. The empirical results from Shannon and Rényi entropies indicated higher volatility during the COVID-19 pandemic for all sectoral indices except Oil and Gas. However, the consumer staples sectors have shown a form of resilience compared to other sectors. Indeed, the impact of COVID-19 on the consumer staples sectoral indices’ volatilities was negligible compared to other sectors. In addition, investing in a portfolio composed of Mining or Construction and Building Materials stocks was risky due to the increased volatility before and during the epidemic. However, after the COVID-19 pandemic, the entropy level corresponding to all sectors has rearranged except the Beverage sector, which kept the lowest entropy during the three periods. Thus, it seems that the Beverage sector was a safe investment for the three periods. The findings are crucial for governments, businesses, private and public authorities, and investors to create recovery action plans for sensitive sectors and give investors trust to make smarter investment decisions.

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    • Figure 1. Rényi entropy (Hr) versus scale r for PG
    • Figure 2. Rényi entropy (Hr) versus scale r for MINES
    • Figure 3. Rényi entropy (Hr) versus scale r for AGRO
    • Figure 4. Rényi entropy (Hr) versus scale r for BMC
    • Figure 5. Rényi entropy (Hr) versus scale r for BANK
    • Figure 6. Rényi entropy (Hr) versus scale r for DISTR
    • Figure 7. Rényi entropy (Hr) versus scale r for BOISS
    • Figure 8. Rényi entropies versus scale r during the pre-crisis period for all indices
    • Figure 9. Rényi entropies versus scale r during the post-crisis period for all indices.
    • Figure 10. Rényi entropies versus scale r during the crisis period for all indices
    • Figure 11. Shannon entropy using a maximum likelihood (ML) estimator during the three periods for all sectoral indices
    • Table 1. Descriptions of Moroccan sectoral indices
    • Table A1. Different Rényi entropy measures of B&MC, P&G, MINES, AGRO, DISTR, BOISS, and BANK before the COVID-19 crisis (Pre-c), during the COVID-19 crisis (C), and after the COVID-19 crisis (Post-C)
    • Table A2. Different Shannon entropy measures of B&MC, P&G, MINES, AGRO, DISTR, BOISS, and BANK before the COVID-19 crisis (Pre-c), during the COVID-19 crisis (C), and after the COVID-19 crisis (Post-C)
    • Conceptualization
      Fadwa Bouhlal
    • Data curation
      Fadwa Bouhlal
    • Formal Analysis
      Fadwa Bouhlal
    • Investigation
      Fadwa Bouhlal
    • Methodology
      Fadwa Bouhlal
    • Software
      Fadwa Bouhlal, Moulay Brahim Sedra
    • Writing – original draft
      Fadwa Bouhlal
    • Funding acquisition
      Moulay Brahim Sedra
    • Project administration
      Moulay Brahim Sedra
    • Resources
      Moulay Brahim Sedra
    • Writing – review & editing
      Moulay Brahim Sedra