Author(s): Joseph Olorunfemi Akande
The Covid-19 (coronavirus) phenomenon is considered as the largest health, social and economic crisis of the century. The contagious disease poses significant negative impacts including economic recession, retrenchment, and uncertainties in the financial markets. The paper aims to find whether the pandemic causes significant volatility of stock returns, thus identifying the countries whose stock prices are worst hit. Since volatility serves as a gauge of the extent of risk in the financial markets, the paper focuses is on the volatility of stock returns The paper uses the generalized autoregressive conditional heteroscedasticity (GARCH) model to examine the volatility dynamics of stock returns before and during the periods of the pandemics. According to the outcomes, stock market returns of four countries (Kenya, Morrocco, Tanzania, and Uganda) are significantly stable before the Covid-19 crisis and the volatility is not persistence but faded after temporarily perturbations. The evidence indicates the stock returns in Nigeria and South Africa (SA) are significantly unstable, nervous, and jumpy, as well as the volatility remains long and persistence in Nigeria and SA. However, the estimation identifies that the markets are jumpy during the pandemic period in all six countries examined. Specifically, the evidence identifies that SA, Nigeria and Tanzania are worse hit. The result has implication for regulations and policymaking as well as offering investors a guide to consider in making informed decisions, since volatility is essential to individual investors, fund managers as well as financial regulators to evaluate the level of uncertainty around their investments.