Czech Stock Market Volatility before and during the Covid-19 Crisis

ABSTRACT

This paper deals with the analysis of the Czech stock market characterized by the Prague PX stock returns using the weekly data between January 1, 2017 and January 21, 2021 in order to investigate the impact of the Covid-19 pandemic. Two different approaches were applied, the asymmetric EGARCH model and the two-state Markov switching model. Both approaches confirmed the time-varying behaviour of stock returns and corresponding volatility during the analysed period reflecting the higher volatility not only during the Covid-19 period, but during the last quarter of 2018 attributable to the global economic slowdown, as well. Since the EGARCH model enabled to capture the volatility persistence and higher impact of negative shocks in comparison to positive shocks of the same magnitude, with the presented Markov switching model we were able to identify the probabilities with which each state occurred at each point in time. © Proceedings of the 14th International Conference on Strategic Management and its Support by Information Systems 2021, SMSIS 2021.