The policy response to COVID-19 pandemic and its impact on the equity market sentiment: The Indian experience.

We examine the dynamics of the impact of the evolving policy response during the COVID-19 pandemic on the equity market sentiment in India. We operationalise our study by examining the India VIX, the fear gauge of the Indian equity market as an indicator for the market sentiment, and the country level Government Response Index of the Blavatnik School of Government, Oxford University as an indicator for the policy response. The relation is examined through the Markov-switching model using high-frequency daily data from January 30, 2020, to May 31, 2021. The evidence suggests that the policy response has a positive impact on the market sentiment when the market is fearful. Further, the evidence suggests that both the high-fear state and the low-fear state of the market sentiment given by the model are short-lived indicating heightened volatility and possible speculation during the ongoing pandemic in the Indian equity market.

Time-Varying Risks in ESG Equity Investments during the COVID-19 Pandemic

We analyse the time-varying risks associated with ESG equity investments in developed, emerging and BRIC equity markets in the wake of the COVID-19 pandemic which has once again underscored the vulnerability of the financial space to shocks. For this purpose, the nonlinear Markov regime switching model is used to analyse the time-varying beta and idiosyncratic volatility of the World ESG Leaders, Emerging Markets ESG Leaders and BRIC ESG Leaders equity portfolios provided by Morgan Stanley Capital International (MSCI). To further complement the evidence, we also refer to the global ACWI ESG Leaders index which represents both developed markets and emerging markets. The evidence suggests that the risk dynamics of the ESG equity portfolios representing the developed markets, emerging markets, BRIC markets and the global markets are distinct during the crisis and calm period. ESG equity investments have higher systematic risk exposure in emerging markets and BRIC markets during the crisis period as well as calm periods. On the other hand, ESG equity investments have higher systematic risk exposure during the crisis period only in case of developed markets. The results of the study provide insights on the time -varying risk dynamics of ESG investing and thus, facilitate informed investment decisions.

Evento Cisne Negro e a Volatilidade do Mercado de Ações Resposta a Choques em Mercados Desenvolvidos, Emergentes, Fronteiriços e BRIC: Lições da Pandemia do COVID-19

We study the impact of shocks (news flow) on stock market volatility in different economic regions, namely the developed, emerging, frontier, and BRIC stock markets during the COVID-19 pandemic, which was a‘Black Swan Event’. The daily returns of relevant MSCI indices from January 30, 2020 to October 30, 2020 are examined using the EGARCH model’s News Impact Curve to gain a perspective on the volatility behaviour in stock markets in the developed, emerging, frontier, and BRIC countries' stock markets. Evidence suggests that the developed markets in the Pacific and Europe, the BRIC countries, the emerging markets in Asia, Europe, and Latin America and the frontier markets in Asia were associated with asymmetric volatility response to shocks. Further, the developed markets in North America, and the frontier markets in Africa were associated with a symmetric volatility response. We observe that the volatility response to shocks in different regions is not uniform and varies according to the size and sign of the shock. The findings of the study provide insights to the investors and the academics in understanding the behaviour of volatility globally during a Black Swan Event, and provides critical inputs in global portfolio decisions.Alternate :Estuda-se o impacto dos choques (fluxo de notícias) na volatilidade do mercado de ações nas diferentes regiões econômicas, nomeadamente os mercados de ações desenvolvidos, emergentes, de fronteira e BRIC durante a pandemia de COVID-19, um ‘Evento Cisne Negro’. Os retornos diários dos índices MSCI relevantes a partir de 30 de janeiro 2020 a 30 de outubro de 2020 são examinados usando a Curva de Impacto de Notícias do modelo EGARCH para obter uma perspectiva sobre o comportamento da volatilidade nos mercados de ações nos mercados de ações desenvolvidos, emergentes, de fronteira e BRIC. Evidências sugerem que os mercados desenvolvidos no Pacífico e na Europa, os BRICs, os mercados emergentes na Ásia, Europa, América Latina e os mercados de fronteira na Ásia foram associados à resposta de volatilidade assimétrica a choques. Além disso, os mercados desenvolvidos na América do Norte e os mercados fronteiriços na África foram associados a uma resposta de volatilidade simétrica. Observa-se que a resposta da volatilidade a choques em diferentes regiões não é uniforme e varia de acordo com o tamanho e sinal do choque. As descobertas do estudo fornecem insights para os investidores e acadêmicos na compreensão do comportamento da volatilidade globalmente durante um Evento Cisne Negro e fornecem informações críticas nas decisões globais de portfólio.

Black Swan Event and The Stock Market Volatility Response to Shocks in Developed, Emerging, Frontier and the BRIC Markets: Lessons from the COVID-19 Pandemic

We study the impact of shocks (news flow) on stock market volatility in different economic regions, namely the developed, emerging, frontier, and BRIC stock markets during the COVID-19 pandemic, which was a'Black Swan Event'. The daily returns of relevant MSCI indices from January 30, 2020 to October 30, 2020 are examined using the EGARCH model's News Impact Curve to gain a perspective on the volatility behaviour in stock markets in the developed, emerging, frontier, and BRIC countries' stock markets. Evidence suggests that the developed markets in the Pacific and Europe, the BRIC countries, the emerging markets in Asia, Europe, and Latin America and the frontier markets in Asia were associated with asymmetric volatility response to shocks. Further, the developed markets in North America, and the frontier markets in Africa were associated with a symmetric volatility response. We observe that the volatility response to shocks in different regions is not uniform and varies according to the size and sign of the shock. The findings of the study provide insights to the investors and the academics in understanding the behaviour of volatility globally during a Black Swan Event, and provides critical inputs in global portfolio decisions.Alternate :Estuda-se o impacto dos choques (fluxo de notícias) na volatilidade do mercado de ações nas diferentes regiões econômicas, nomeadamente os mercados de ações desenvolvidos, emergentes, de fronteira e BRIC durante a pandemia de COVID-19, um ‘Evento Cisne Negro’. Os retornos diários dos índices MSCI relevantes a partir de 30 de janeiro 2020 a 30 de outubro de 2020 são examinados usando a Curva de Impacto de Notícias do modelo EGARCH para obter uma perspectiva sobre o comportamento da volatilidade nos mercados de ações nos mercados de ações desenvolvidos, emergentes, de fronteira e BRIC. Evidências sugerem que os mercados desenvolvidos no Pacífico e na Europa, os BRICs, os mercados emergentes na Ásia, Europa, América Latina e os mercados de fronteira na Ásia foram associados à resposta de volatilidade assimétrica a choques. Além disso, os mercados desenvolvidos na América do Norte e os mercados fronteiriços na África foram associados a uma resposta de volatilidade simétrica. Observa-se que a resposta da volatilidade a choques em diferentes regiões não é uniforme e varia de acordo com o tamanho e sinal do choque. As descobertas do estudo fornecem insights para os investidores e acadêmicos na compreensão do comportamento da volatilidade globalmente durante um Evento Cisne Negro e fornecem informações críticas nas decisões globais de portfólio.