Duttilo, P.; Gattone, S.A.; Di Battista, T. Volatility Modeling: An Overview of Equity Markets in the Euro Area during COVID-19 Pandemic. Mathematics2021, 9, 1212.
Duttilo, P.; Gattone, S.A.; Di Battista, T. Volatility Modeling: An Overview of Equity Markets in the Euro Area during COVID-19 Pandemic. Mathematics 2021, 9, 1212.
Duttilo, P.; Gattone, S.A.; Di Battista, T. Volatility Modeling: An Overview of Equity Markets in the Euro Area during COVID-19 Pandemic. Mathematics2021, 9, 1212.
Duttilo, P.; Gattone, S.A.; Di Battista, T. Volatility Modeling: An Overview of Equity Markets in the Euro Area during COVID-19 Pandemic. Mathematics 2021, 9, 1212.
Abstract
Volatility is the most widespread measure of risk. Volatility modeling allows investors to capture potential losses and investment opportunities. This work aims to examine the impact of the two waves of COVID-19 infections on the return and volatility of the stock market indices of the euro area countries. The study also focuses on other important aspects such as time-varying risk premium and leverage effect. Thus, this investigation employed the Threshold GARCH(1,1)-in-Mean model with exogenous dummy variables. Daily returns of ten euro area stock indices from 4th January 2016 to 31th December 2020 has been used for the analysis. The results reveal that euro area stock markets respond differently to the COVID-19 pandemic. Specifically, the first wave of COVID-19 infections had a notable impact on stock market volatility of euro area countries with large and middle financial centres while the second wave had a significant impact only on stock market volatility of Belgium.
Keywords
Volatility; COVID-19 Pandemic; GARCH models; Euro area stock indices.
Subject
Computer Science and Mathematics, Algebra and Number Theory
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
