ABSTRACT
Purpose: This paper aims to analyze the impact of COVID-19 on Pakistan's traditional (KSE-100) and Islamic (KMI-30) stock market returns. Methodology: This study uses daily data of total cases and deaths of COVID-19 from February 25, 2020 to May 26, 2021. We utilize continuous wavelet transform (CWT), partial wavelet transforms and wavelet coherence transform (WCT) approaches to inspect the impact of COVID-19 on the stock return of KSE-100 and KMI-30 from March 13, 2020 to May 26, 2021. Findings: Contrary to European and several Asian stock markets, these both indexes behave the opposite during COVID-19. This study indicates that COVID-19 influences both these indexes and has a significant impact on both KSE-100 and KMI-30 index in the longer time frame. This study also discloses that with the increasing number of total cases, total death stock market daily return. Practical implications: Investors diversify their portfolio in the desire to achieve maximum return on minimum risk so they diversify across different countries and certain emerging market indexes might provide them a big edge to maximize their return. This diversified strategy can financially support different well-performing emerging markets and save emerging economies. This study enhances the investors trust and confidence to invest in both KSE-100 and KMI-30 due to favorable return of stocks. Originality/value: This examines the co-movement between COVID-19 and the traditional and Islamic stock index of Pakistan whereas, the previous paper only examined the volatility of these indexes during COVID-19. This study also extends the literature that examines how COVID-19 affected the traditional and Islamic stock market indexes.