COVID-19’s disasters are perilous than Global Financial Crisis: A rumor or fact?

• Published in: Finance research letters Vol. 36; p. 101669
• Main Authors: Shehzad, Khurram, Xiaoxing, Liu, Kazouz, Hayfa
• Format: Journal Article
• Language: English
• Published: Netherlands Elsevier Inc 01-10-2020
• Subjects: APGARCH model; COVID-19; Financial markets; Global Financial Crises; Leverage effect; COVID-19; APGARCH model; Financial markets; Leverage effect; G11; Global Financial Crises; G01; G15; G14
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2020.101669

•Financial markets of the world confronted an extreme collision in their market values due to COVID-19.•COVID-19 exposed countless sway on financial volatility of the US and European markets than GFC.•During the period of COVID-19, Asian markets are making available better opportunities to diversify the financial risk.•COVID-19 revealed a negative and significant association with returns of S&P 500 index.
This investigation employed the Asymmetric Power GARCH model and found that COVID-19 substantially harms the US and Japan's market returns. Moreover, COVID-19 has influenced the variance of the US, Germany, and Italy's stock markets more than the Global Financial Crises (GFC). However, GFC indicated a more significant impact on the financial volatility of the Nikkei 225 index and SSEC than COVID-19. The study confirmed the leverage effect for the S&P 500, Nasdaq Composite Index, DAX 30, Nikkei 225, FTSE MIB, and SSEC. The analysis authenticated that the health crisis that befell due to COVID-19 have imperatively originated the financial crisis globally; however, the Asian markets still make available better prospects for portfolio optimization.