Stock market responses to COVID-19: The behaviors of mean reversion, dependence and persistence

Coşkun Y., Akinsomi O., Gil-Alana L. A., Yaya O. S.

Heliyon, vol.9, no.4, 2023 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 9 Issue: 4
  • Publication Date: 2023
  • Doi Number: 10.1016/j.heliyon.2023.e15084
  • Journal Name: Heliyon
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, CAB Abstracts, Food Science & Technology Abstracts, Veterinary Science Database, Directory of Open Access Journals
  • Keywords: Coronavirus, Fractional integration, Long memory, Mean reversion, Stock markets
  • TED University Affiliated: Yes

Abstract

We examine stock market responses during the COVID-19 pandemic period using fractional integration techniques. The evidence suggests that stock markets generally follow a synchronized movement before and the stages of the pandemic shocks. We find while mean reversion significantly declines, the degree of persistence and dependence has been increased in the majority of the stock market indices in whole sample analysis covering the period of August 02, 2019 and July 09, 2020. This outcome implies increasing integration and possibly declining benefits of diversification for the global stock portfolio management.