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Asymmetric Modelling of COVID-19 related news persistence impact on Saudi Arabia stock market volatility

Hussein Eledum, Omer Ahmed Sayed

Abstract



This paper investigates the persistence impact of the COVID-19 related news on the volatility of the Saudi Arabia stock market based on daily time series data consists of closing prices of 21 industry groups that constitute the Saudi stock market as well as the main market for the period from 4th August 2019 to 21st May 2020 by running the EGARCH model. The empirical findings showed that the Saudi Arabia market was significantly affected during the nine trading days after the first case in Saudi Arabia. Moreover, the EGARCH model estimates supported the existence of asymmetric effect on the Saudi stock market with a 25% negative (leverage effect) and 14% positive effects. It was discovered that the Saudi stock market showed evidence of volatility persistence for the main
market index and the majority of the industry groups. This paper contributes to the existing literature on the impact of COVID-19 related news on stock returns volatility. To our knowledge, similar studies are absent in the literature about Saudi Arabia. This study used the EGARCH model, which is considered the most reliable analysis technique to investigate this cloudy subject.

Keywords


Unit root, Leverage effect, ARCH effect, Stock returns, EGARCH model.

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