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International Review of Economics & Finance ; 2021.
Article in English | ScienceDirect | ID: covidwho-1071507


The study evaluates the return and volatility transmission between the health and tourism stocks. The outbreak of Covid-19 pandemic brought about an unprecedented crisis in the global health and financial market with the tourism sector being among the largest casualty as it experiences an almost total collapse as a result of economic lockdowns and movement restrictions, while the health sector witnessed considerable boom. We employ the VARMA–CCC-AGARCH model, based on the conducted preliminary tests, on daily data collected for health and tourism stocks proxied using the Dow Jones US sector indices between January 02, 2018 and July 09, 2020. The empirical estimation is also partitioned into full sample, before and during Covid-19 periods to elicit the impact of the pandemic outbreak. We further examine the optimal weights of holding health and tourism stocks and compute the hedging ratios in the presence of health risks. Our empirical findings show evidence of significant negative bidirectional returns spillover transmission between the health and tourism sectors particularly during the Covid-19 period. In addition, the hedge ratios further confirmed the hedging effectiveness of health stocks for risks associated with tourism stocks which is also more noticeable in the pandemic period. Essentially, our results show that a diversified asset portfolio that includes health together with tourism stocks may improve risk-adjusted return performance for investors especially during pandemics.

Emerg. Mark. Financ. Trade ; 10(56): 2310-2331, 20200808.
Article in English | WHO COVID, ELSEVIER | ID: covidwho-671493


This paper offers two main innovations. First, we construct a global fear index (GFI) for the COVID-19 pandemic to support economic, financial, and policy analyses in this area. Second, we demonstrate the application of the index to stock return predictability using OECD data. The panel data predictability results reveal the significance of the index as a good predictor of stock returns during the pandemic. Also, we find that accounting for “asymmetry” effect and macro (common) factors improves the forecast performance of the GFI-based predictive model for stock returns. With regular updates and improvements of the index, several empirical analyses can be extended to other macroeconomic fundamentals in future research.

J Behav Exp Finance ; 27: 100383, 2020 Sep.
Article in English | MEDLINE | ID: covidwho-665356


In this paper, we subject the global fear index (GFI) for the COVID-19 pandemic to empirical scrutiny by examining its predictive power in the predictability of commodity price returns during the pandemic. One of the attractions to the index lies in its coverage as all the countries and by extension regions and territories in the world are considered in the construction of the index. Our results show evidence of a positive relationship between commodity price returns and the global fear index, confirming that commodity returns increase as COVID-19 related fear rises. By way of extension, we further establish that commodity market offers better safe-haven properties than the stock market given the negative association between GFI and the latter. Finally, the GFI series improves the forecast accuracy of the predictive model for commodity price returns and its forecast outcome outperforms the historical average (constant returns) model both for the in-sample and out-of-sample forecasts. Our results are robust to alternative measures of pandemics.