Asymmetric effect of COVID-19 pandemic on E7 stock indices: Evidence from quantile-on-quantile regression approach

Shabir Mohsin Hashmi; Bisharat Hussain Chang; Li Rong

doi:10.1016/j.ribaf.2021.101485

Asymmetric effect of COVID-19 pandemic on E7 stock indices: Evidence from quantile-on-quantile regression approach

Res Int Bus Finance. 2021 Dec:58:101485. doi: 10.1016/j.ribaf.2021.101485. Epub 2021 Jun 23.

Authors

Shabir Mohsin Hashmi¹, Bisharat Hussain Chang², Li Rong³

Affiliations

¹ Belt and Road Research Centre, School of Economics and Management, Yancheng Institute of Technology, Yancheng, Jiangsu, 224051, China.
² Department of Management Sciences, Shaheed Zulfikar Ali Bhutto Institute of Science and Technology, Larkana, Sindh, Pakistan.
³ Wuhan University of Technology, School of Economics, Wuhan, Hubei, 430070, China.

Abstract

Various studies have been conducted to examine the effect of COVID-19 on stock prices. However, these studies failed to examine the effect across quantile distributions of both dependent and independent variables. This study pays particular attention to the emerging 7 countries and examines the effect of the novel coronavirus 2019 (COVID-19) pandemic on stock prices. We use quantile unit root and quantile cointegration tests to examine the integrating properties of COVID-19 cases and deaths with stock prices and use quantile-on-quantile regression (QQR) to examine the relationship across quantile distributions of both dependent and independent variables. Quantile cointegration estimates indicate that stock prices are integrated with COVID-19 cases whereas QQR estimates indicate a weak positive relationship at the upper quantiles of stock prices, and a strong negative effect is found at the lower quantiles of stock prices. Policy implications are recommended based on the findings of this study.

Keywords: COVID-19; E7 stock markets; Quantile cointegration; Quantile-on-quantile regression.