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This study analyzes the impact of Covid-19 on stock market liquidity of China and four worst hit countries by the pandemic. Using daily data for the stock market illiquidity spanning over July 1, 2019 to July 10, 2020 and the data for new cases and deaths over the period from December 31, 2019 to July 10, 2020, the results of our GARCH analysis show that liquidity in stock markets of all the sampled countries hit hard by the news of the Covid-19 outbreak. We find that for all sampled countries increase in illiquidity due to temporary shocks reverts to long term trend shortly, suggesting that the liquidity shocks due to the incidence of Covid-19 were short lived. The findings of our VAR analysis show an absence of any short-term relationship between Covid-19 new cases or deaths and illiquidity. Since the series are not integrated at same level, long-term relationship between Covid-19 and stock market illiquidity do not exist as well suggesting no evidence of the effect of Covid-19 on stock market liquidity. [ABSTRACT FROM AUTHOR]

This study aims to investigate the causal relationship between the Turkish stock market returns, namely XU100, and foreign exchange rates, namely USD/TRY and EUR/TRY, in Turkey using the wavelet coherence approach. In this study, we focus on the period from April 2000 to March 2019. Our findings reveal the following: (i) While we identify substantial volatility in the exchange rate during the 2000 November (banking crisis), 2001 February (economic crisis), and 2018 July (exchange rate crisis) periods, significant volatility was observed in the Turkish stock market during the 2000 banking crisis, 2001 economic crisis, and 2008 global crisis periods; (ii) There is a negative correlation between the Turkish stock market and foreign exchange rates at different frequencies over the selected sample period; (iii) A unidirectional causality runs from the Turkish stock market to foreign exchange rates between 2000 and 2004 at a scale of 4 months and between 2008 and 2012 at a scale of 32 months; (iv) Although inconsistent results are observed for the models of USD/TRY‐XU100 and EUR/TRY‐XU100, our empirical results show that the correlations between USD/TRY and XU100 are stronger than between EUR/TRY and XU100. [ABSTRACT FROM AUTHOR]

During the recent COVID-19 outbreak, the crude oil market experienced enormous price fluctuations. A large number of researchers contended the volatility observed in oil market as unprecedented and it was immediately attributed to the pandemic owing to its globally devastating nature. Whether or not this attribution is justified, is the major question we have raised in this paper. We perform the comparative analysis of the volatility spasms of oil market during the COVID-19 pandemic (COVID-19), the Global financial crisis of 2008 (GFC) and the SARS outbreak of 2002–2004 (SARS). Preliminary investigation is conducted using two proxies of market sentiment which are oil price returns and oil price spread. For further investigations we apply symmetric GARCH (1,1) and the asymmetric GJR-GARCH (1,1) models. Our results based on skewness and kurtosis, indicate an extremely high degree of fat tail risk implying COVID-19 crisis as low probability yet high severity event a.k.a. black swan event. Our results further confirm the presence of volatility clustering (GARCH effect) along with the highest degree of asymmetry during COVID-19. These facts collectively make COVID-19 crisis more uncertain and pessimistic compared to the GFC and SARS. [ABSTRACT FROM AUTHOR]

This study evaluates the possibility of having a causal link between geopolitical risk (GPR) and defence expenditure (DE) by employing panel bootstrap Granger causality method. The results highlight the causality running from GPR to DE in China, India, and Saudi Arabia. In other words, the GPR in the form of border disputes, wars and terrorism threats can pursuade countries to increase their defence expenditure. The results we obtain for these three countries are also supported by the neoclassical model, which asserts that GPR is a significant contributor to DE. Contrary to above, there are evidences for reverse causality as well where DE is causing GPR in South Korea and Turkey. The most probable reasons for reverse causality could be the various alliances for regional security by the countries and their dependency on the import of military equipment. The results indicate an insignificant relationship between GPR and DE in Brazil, Israel, and Russia; where the DE is mainly determined by the internal political system and its contribution towards employment generation. On the basis of our results, it can be inferred that the convergence of regional interests in the form of a peaceful solution of disputes may guarantee security. Also, the formulation of the policies that are independent and isolated from the influence of external powers, can help in controlling the ever-increasing DE and GPR in these countries. [ABSTRACT FROM AUTHOR]