China Real Estate Price and Stock Market Volatility during COVID-19
DOI:
https://doi.org/10.52547/ijimes.2.3.82DOR:
https://dorl.net/dor/20.1001.1.27832678.2022.2.3.6.7Keywords:
COVID-19, GHARCH, Real Estate, Stock Market, Volatility Spillover EffectAbstract
Purpose: This study examined the response of stock prices on the China Stock Exchange (SSE) and Real Estate prices to COVID-19 using an event study approach and the GARCH model.
Methodology: In this study, the dimensions and key components of the use of large data obtained from the Internet of Things (IoT) in an industry's supply chain are investigated as a case study. Finally, a model for implementing an agile and lean supply chain based on IoT data analysis to improve the supply chain performance of these industries during emergency drug distribution during critical conditions is presented.
Findings: We measure volatility spillovers by defining the volatility of each sector in the SSE index. In this study, we investigate the volatility of China stock market. Furthermore, we analyze the dynamic connectedness during COVID-19 pandemic periods to identify the changes in their relationship following the two categories. These empirical findings have several important implications for portfolio managers, policymakers, and investors.
Originality/Value: This paper focuses on investigating the impacts of the novel coronavirus (COVID-19) on the China stock market volatility from a GHARCH and VAR model point of view. The GHARCH model used proves that during the COVID-19 pandemic, stock price volatility and real estate price volatility increases and lead to a decrease in abnormal returns. The empirical findings also validate the efficient market hypothesis theory related to the study of events and the theory of financial behavior related to uncertainty.
Downloads
References
Ramelli, Stefano. (2020). Feverish Stock Price Reactions to the Novel Coronavirus. SSRN Electronic Journal, 40-56.
Al-Awadhi, A. M. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 100-326.
Albulescu, C. (2020). Coronavirus and Oil Price Crash. SSRN Electronic Journal, 10-30.
Ramelli, S., & Wagner, A. (2020). What the stock market tells us about the consequences of COVID-19. Mitigating the COVID Economic Crisis: Act Fast and Do Whatever, 63.
Hong, H., Bian, Z., & Lee, C. C. (2021). COVID-19 and instability of stock market performance: evidence from the US. Financial Innovation, 7(1), 1-18.
Zhang, Y., & Ma, Z. F. (2020). Impact of the COVID-19 pandemic on mental health and quality of life among local residents in Liaoning Province, China: A cross-sectional study. International journal of environmental research and public health, 17(7), 2381.
Barndorff-Nielsen, O. E. (2008). Measuring Downside Risk - Realised Semivariance. SSRN Electronic Journal, 40-56.
Lin, J. Y., & Treichel, V. (2012). Learning from China's rise to escape the middle-income trap: a new structural economics approach to Latin America. World Bank policy research working paper, (6165).
Adair, P. (2009). Économie non observée et emploi informel dans les pays de l'Union européenne. Revue économique, 1117-1153.
Li, H., Jeon, B. N., Cho, S. Y., & Chiang, T. C. (2008). The impact of sovereign rating changes and financial contagion on stock market returns: Evidence from five Asian countries. Global Finance Journal, 46-55.
Yuksel, A. (2016). The relationship between stock and real estate prices in Turkey: Evidence around the global financial crisis. Central Bank Review, 33-40.
Coskun, Y. (2011). Financial Engineering and Engineering of Financial Regulation. SSRN Electronic Journal.
Benlagha, N., & El Omari, S. (2021). onnectedness of stock markets with gold and oil: New evidence from COVID-19 pandemic. Finance Research Letters.
Hansen, P. R. (2016). Exponential GARCH Modeling With Realized Measures of Volatility. Journal of Business & Economic Statistics, 269-287.
Dufour, J.-M. (2006). Resampling methods in econometrics. Journal of Econometrics, 411-419.
Zaremba, A., Kizys, R., Aharon, D. Y., & Demir, E. (2020). Infected markets: Novel coronavirus, government interventions, and stock return volatility around the globe. Finance Research Letters(35).
ahanshahi, A. A. (2020). The distress of Iranian adults during the Covid-19 pandemic–More distressed than the Chinese and with different predictors. Brain, behavior, and immunity , 124.
Singh, N., Tang, Y., Zhang, Z., & Zheng, C. (2020). COVID-19 waste management: effective and successful measures in Wuhan, China. Resources, conservation, and recycling, 163.
Contessi, Silvio, and Pierangelo De Pace. (2021). The international spread of COVID-19 stock market collapses. Finance Research Letters, 42.
Mazur, M., Dang, M., & Vega, M. (2021). COVID-19 and the march 2020 stock market crash. Evidence from S&P1500. Finance research letters, 38.
McKenna, K. Y., Green, A. S., & Gleason, M. E. (2002). Relationship formation on the Internet: What’s the big attraction? Journal of social issues, 9-31.
Kapopoulos, P., & Siokis, F. (2005). Stock market crashes and dynamics of aftershocks. Economics Letters, 89(1), 48-54.
Chen, T. (2001). Capillary Pressure During Immiscible Displacement. Journal of Canadian Petroleum Technology, 777-786.
Sutton, M. H. (2002). Financial Reporting at a Crossroads. Accounting Horizons, 319-328.
Jan Kakes, Jan Willem Van Den End. (2004). Do stock prices affect house prices? Evidence for the Netherlands. Applied Economics Letters, 741-744.
Sim, S. H., & Chang, B. K. (2006). Stock and real estate markets in Korea: wealth or credit-price effect. Journal of Economic Research-seoul, 103.
Ibrahim, M. M. (2010). Subcutaneous and visceral adipose tissue: structural and functional differences. Obesity reviews, 11-18.
Lean, H. H., & Smyth, R. (2012). interest rates and stock prices in Malaysia. International Journal of Business and Society, 49-62.
Baker, S. R., Bloom, N., Davis, S. J., & Terry, S. J. (2020). Covid-induced economic uncertainty. National Bureau of Economic Research.
Junior, C. J. C., Garcia-Cintado, A. C., & Junior, K. M. (2021). Macroeconomic policies and the pandemic-driven recession. International Review of Economics & Finance, 438-465.
Altig, D., Baker, S., Barrero, J. M., Bloom, N., Bunn, P., Chen, S., ... & Thwaites, G. (2020). Economic uncertainty before and during the COVID-19 pandemic. Journal of Public Economics, 191.
Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: Cases or fatalities? Research in International Business and Finance, 54.
Rai, A., Mahata, A., Nurujjaman, M., & Prakash, O. (2022). Statistical properties of the aftershocks of stock market crashes revisited: Analysis based on the 1987 crash, financial-crisis-2008 and COVID-19 pandemic. International Journal of Modern Physics C, 33.
Albulescu, C. (2021). COVID-19 and the United States financial markets’ volatility. Finance Research Letters, 38.
Jahanshahi, A. A. (2020). he distress of Iranian adults during the Covid-19 pandemic–More distressed than the Chinese and with different predictors. Brain, behavior, and immunity, 87-124.
Bakas, D. &. (2020). Commodity price volatility and the economic uncertainty of pandemics. Economics Letters, 193.
Zhao, S., Lin, Q., Ran, J., Musa, S. S., Yang, G., Wang, W., ... & Wang, M. H. (2020). Preliminary estimation of the basic reproduction number of novel coronavirus (2019-nCoV) in China, from 2019 to 2020: A data-driven analysis in the early phase of the outbreak. International journal of infectious diseases, 214-217.
Ji, Q., Zhang, D., & Zhao, Y. (2020). Searching for safe-haven assets during the COVID-19 pandemic. International Review of Financial Analysis, 71.
Bai, Y., Yao, L., Wei, T., Tian, F., Jin, D. Y., Chen, L., & Wang, M. (2020). Presumed asymptomatic carrier transmission of COVID-19. Jama, 1406-1407.
Topcu, M., & Gulal, O. S. (2020). The impact of COVID-19 on emerging stock markets. Finance Research Letters, 36.
Shahzad, S. J. H., Bouri, E., Roubaud, D., & Kristoufek, L. (2020). Safe haven, hedge and diversification for G7 stock markets: Gold versus bitcoin. Economic Modelling, 212-224.
Akhtaruzzaman, M., Boubaker, S., & Sensoy, A. (2021). Financial contagion during COVID–19 crisis. Finance Research Letters, 38.
Fang, W., & Miller, S. M. (2002). Dynamic effects of currency depreciation on stock market returns during the Asian financial crisis.
Mao, C., Shen, Q., Pan, W., & Ye, K. (2015). Major barriers to off-site construction: the developer’s perspective in China. Journal of Management in Engineering, 31.
Marmot, M., & Wilkinson, R. G. (2001). Psychosocial and material pathways in the relation between income and health: a response to Lynch et al. Bmj, 1233-1236.
Corsetti, G., Pericoli, M., & Sbracia, M. (2005). Some contagion, some interdependence’: More pitfalls in tests of financial contagion. Journal of International Money and Finance, 1177-1199.
Chiang, T. C., Jeon, B. N., & Li, H. (2007). Dynamic correlation analysis of financial contagion: Evidence from Asian markets. Journal of International Money and finance, 1206-1228.
Huyghebaert, N., & Wang, L. (2010). he co-movement of stock markets in East Asia: Did the 1997–1998 Asian financial crisis really strengthen stock market integration? China Economic Review, 98-112.
Manopimoke, P. (2018). Thai inflation dynamics in a globalized economy. Journal of the Asia Pacific Economy, 465-495.
Liow, K., & Ye, Q. . (2018). olatility causality and contagion in international securitized real estate markets: evidence from markov-switching analysis. Journal of European Real Estate Research.
Li, Y., & Giles, D. E. (2015). Modelling volatility spillover effects between developed stock markets and Asian emerging stock markets. International Journal of Finance & Economics, 155-177.
Tamakoshi, G., & Hamori, S. (2013). Volatility and mean spillovers between sovereign and banking sector CDS markets: a note on the European sovereign debt crisis. Applied Economics Letters, 262-266.
Diebold, F. X., & Yılmaz, K. (2015). Financial and macroeconomic connectedness: A network approach to measurement and monitoring. Oxford University Press.
Calice, G., Chen, J., & Williams, J. (2013). Liquidity spillovers in sovereign bond and CDS markets: An analysis of the Eurozone sovereign debt crisis. Journal of Economic Behavior & Organization, 122-143.
Lahmiri, S., & Bekiros, S. (2018). Chaos, randomness and multi-fractality in Bitcoin market. Chaos, solitons & fractals, 28-34.
Alter, A., & Beyer, A. (2014). The dynamics of spillover effects during the European sovereign debt turmoil. Journal of Banking & Finance, 134-153.
Bouri, E., de Boyrie, M. E., & Pavlova, I. (2017). Volatility transmission from commodity markets to sovereign CDS spreads in emerging and frontier countries. International Review of Financial Analysis, 155-165.
Karfakis, C., & Panagiotidis, T. (2015). The effects of global monetary policy and Greek debt crisis on the dynamic conditional correlations of currency markets. Empirica, 795-811.
Apergis, N., Baruník, J., & Lau, M. C. K. (2017). Good volatility, bad volatility: What drives the asymmetric connectedness of Australian electricity markets? Energy Economics, 108-115.
Mugaloglu, E., Polat, A. Y., Tekin, H., & Dogan, A. (2021). Oil price shocks during the COVID-19 pandemic: evidence from United Kingdom energy stocks. Energy Research Letters.
Bouri, E., Cepni, O., Gabauer, D., & Gupta, R. (2021). Return connectedness across asset classes around the COVID-19 outbreak. International Review of Financial Analysis, 73.
Umar, Z., Gubareva, M., Tran, D. K., & Teplova, T. (2021). mpact of the COVID-19 induced panic on the environmental, social and governance leaders equity volatility: a time-frequency analysis. Research in international business and finance, 58.
Danis, K., Fonteneau, L., Georges, S., Daniau, C., Bernard-Stoecklin, S., Domegan, L., ... & Schneider, E. (2020). High impact of COVID-19 in long-term care facilities, suggestion for monitoring in the EU/EEA. Eurosurveillance.
Rahman, M. A., Zaman, N., Asyhari, A. T., Al-Turjman, F., Bhuiyan, M. Z. A., & Zolkipli, M. F. (2020). Data-driven dynamic clustering framework for mitigating the adverse economic impact of Covid-19 lockdown practices. Sustainable cities and society, 62.
Onali, E. (2020). Covid-19 and stock market volatility. SSRN 3571453.
Gounopoulos, D., Kosmidou, K., Kousenidis, D., & Patsika, V. (2019). he investigation of the dynamic linkages between real estate market and stock market in Greece. The European Journal of Finance, 647-669.
Cerutti, E., Claessens, S., & Laeven, L. (2017). The use and effectiveness of macroprudential policies: New evidence. Journal of Financial Stability, 203-224.
Li, H. Y., Cao, H., Leung, D. Y., & Mak, Y. W. (2020). The psychological impacts of a COVID-19 outbreak on college students in China: a longitudinal study. International journal of environmental research and public health.
Enders, W., & Siklos, P. L. (2001). Cointegration and threshold adjustment. Journal of Business & Economic Statistics, 166-176.
Bahmani-Oskooee, M., & Ghodsi, S. H. (2018). Asymmetric causality between the US housing market and its stock market: Evidence from state level data. The Journal of Economic Asymmetries, 18.
Mallick, H., & Mahalik, M. K. (2012). Fundamental or speculative factors in the housing markets of emerging economies? Some lessons from China. Journal of Economic Policy Reform, 57-67.
Lin, J. Y. (2011). New structural economics: A framework for rethinking development. The World Bank Research Observer, 26(2), 193-221.
Yong, S. J. (2021). Long COVID or post-COVID-19 syndrome: putative pathophysiology, risk factors, and treatments. Infectious diseases, 737-754.
Copeland, W. E., McGinnis, E., Bai, Y., Adams, Z., Nardone, H., Devadanam, V., ... & Hudziak, J. J. (2021). Impact of COVID-19 pandemic on college student mental health and wellness. Journal of the American Academy of Child & Adolescent Psychiatry, 134-141.
Gherghina, Ș. C. (2021). Corporate Finance. Journal of Risk and Financial Management, 44.
Debakshi Bora, D. B. (2021). The outbreak of COVID‐19 pandemic and its impact on stock market volatility: Evidence from a worst‐affected economy. Journal of Public Affairs.
Cheung, Y.-W. (1996). A causality-in-variance test and its application to financial market prices. Journal of Econometrics, 33-48.
Hafner, C. M., & Herwartz, H. (2006). Volatility impulse responses for multivariate GARCH models: An exchange rate illustration. Journal of International Money and Finance, 25(5), 719-740.
Johansen, P. (1988). Inductive inference of ultimately periodic sequences. BIT, 573-580.
Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica, 1551.
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Nastaran Shahvari
This work is licensed under a Creative Commons Attribution 4.0 International License.
Publisher
