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Dynamics of relationship between stock markets of SAARC countries during COVID-19 pandemic

Vandana Arya (Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, India)
Shveta Singh (Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar, India)

Journal of Economic and Administrative Sciences

ISSN: 1026-4116

Article publication date: 21 July 2022

202

Abstract

Purpose

The paper investigates the dynamic relationship among the stock markets of South Asian Association of Regional Cooperation (SAARC) countries during the COVID-19 pandemic.

Design/methodology/approach

Daily time-series data of four SAARC countries: India, Bangladesh, Pakistan, and Sri Lanka, from February 13th, 2013 to March 31st, 2021 are used. The study considers stock prices prior to the blowout of COVID-19 and during the onset of the pandemic. The novel estimation procedure of the autoregressive distributed lag model is used while the results are also confirmed by post-estimation techniques.

Findings

The study confirms that the COVID-19 contagion has adversely influenced the stock returns of SAARC countries. The findings signify that the pattern of cointegration has significantly different regularities in the pattern of causality in the long run and short run during the COVID-19 crisis. Overall, the study revealed that the COVID-19 pandemic has weakened the dynamic connection among the stock markets of SAARC countries.

Practical implications

To dampen uncertainties generated by the COVID-19 pandemic, the authorities and central banks should be equipped with efficient strategies and guidelines to cope with the crisis created by the pandemic. Further, governments should focus on assuaging the panic faced by investors and enhancing the confidence of domestic as well as foreign investors. Further, the weakened integration of financial markets during the crisis offers opportunities for speculative and arbitrage gains for investors.

Originality/value

The research work is an innovative effort to analyze the impression led by COVID-19 on the SAARC stock markets integration.

Keywords

Acknowledgements

The author would like to thank Mr. Ravinder and Mr. Munesh Kumar, Research Scholar at Haryana School of Business, Guru Jambheshwar University of Science and Technology Hisar, Haryana for their assistance in data collection and mining. Further the author would also like to thank the two referees who provided useful comments which considerably improved the quality of the paper.

Funding: The author declare that no funding is received by author neither from any insitution or from any department.

Citation

Arya, V. and Singh, S. (2022), "Dynamics of relationship between stock markets of SAARC countries during COVID-19 pandemic", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-10-2021-0213

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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