Abstract
Our study investigates the impact of the COVID-19 external shock on the stock return volatility of global firms. Using a sample of 30,516 firms, accounting for 60% of listed firms globally, scattered across 63 countries, we evidence that COVID-19 cases (fatalities) have a positive and significant impact on stock return volatility of global firms, measured at different estimation intervals (windows of 30, 60, 90, 180, and 250 days). In particular, a one standard deviation increase in COVID-19 cases (fatalities) is associated with 0.79% (0.86%) increase in firm volatility. Additionally, we inform that the effect of COVID-19 is amplified for companies from Oceania and Asia. Our insights are advantageous to a wide spectrum of stakeholders, including managers, market participants, and policy makers.
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Notes
- 1.
See https://www.oecd.org/coronavirus/en/themes/global-economy (Accessed 10 February, 2021).
- 2.
- 3.
Further details on Covid-19 infections and fatalities can be found in https://coronavirus.jhu.edu/map.html (Accessed 10 February, 2021).
- 4.
- 5.
See the World Federation of Exchanges https://webcache.googleusercontent.com/search?q=cache:oWYsB4yZzRIJ:https://focus.world-exchanges.org/storage/app/media/statistics/WFE%2520H1%25202019%2520Market%2520Highlights%2520press%2520release%2520draft%25205%252016.08.2019.pdf+&cd=5&hl=en&ct=clnk&gl=gr (Accessed 10 February, 2021).
- 6.
Data on COVID-19 cases and fatalities are available through the World Bank, and in particular through “Our World in Data” (see https://github.com/owid/covid-19-data/blob/master/public/data/README.md (Accessed 10 February, 2021).
- 7.
Since our volatility measures are estimated at windows spanning up to 250 days, we collect stock price data for 250 days trailing the declaration of COVID-19 as global pandemic by the WHO.
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Acknowledgements
This paper is based on Marinela Chamzallari’s dissertation for the MSc in Banking and Finance, at the International Hellenic University, under the supervision of Dr. Antonios Chantziaras. We acknowledge the helpful comments by two anonymous referees. The paper has also benefited from the comments of participants at the 13th International Conference on Economics of the Balkan and Eastern European Countries (Pafos) who provided valuable feedback.
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Appendix—Variable Definitions
Appendix—Variable Definitions
Variable | Definition |
|---|---|
Panel A: Volatility measures | |
Vol30 | The variance of daily stock returns over the past 30 days (Data source: DataStream) |
Vol60 | The variance of daily stock returns over the past 60 days (Data source: DataStream) |
Vol90 | The variance of daily stock returns over the past 90 days (Data source: DataStream) |
Vol180 | The variance of daily stock returns over the past 180 days (Data source: DataStream) |
Vol250 | The variance of daily stock returns over the past 250 days (Data source: DataStream) |
Panel B: Main independent variable—COVID-19 measures | |
LnCASESTOT | Natural logarithm of the total number of COVID-19 cases reported in the country the company is listed (Data source: World Bank) |
LnFATALITIESTOT | Natural logarithm of the total number of COVID-19 fatalities reported in the country the company is listed (Data source: World Bank) |
Panel C: Firm fundamentals | |
ROA | Return on assets, measured as the ratio of income before extraordinary items over total assets (Data source: DataStream) |
LnASSETS | Natural logarithm of total assets (Data source: DataStream) |
LEVERAGE | Leverage ratio, measured as total debt over total assets (Data source: DataStream) |
MB | Market-to-book value of equity (Data source: DataStream) |
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Chamzallari, M., Chantziaras, A., Grose, C. (2022). The Impact of COVID-19 on Firm Stock Price Volatility. In: Sklias, P., Polychronidou, P., Karasavvoglou, A., Pistikou, V., Apostolopoulos, N. (eds) Business Development and Economic Governance in Southeastern Europe. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-05351-1_24
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