The COVID-19 outbreak and effects on major stock market indices across the globe: A machine learning approach

Abstract

Background/Objectives: The Coronavirus disease in 2019 (COVID-19) was first seen in Wuhan (capital of Hubei, Chain), and has since spread throughout the world, resulting in the World Health Organisation (WHO) declaring the 2019-20 coronavirus a pandemic. Its ongoing spread has resulted in a standstill of the world's economy, total lockdown in some counties, closedown of business and firms globally. As of 25 th Mar 2020, 11:00 am GMT, a total of 491,280 cases were reported globally. The evolution of COVID-19 and its economic impact on the regional financial markets are highly uncertain, which makes it difficult for legislators to formulate a suitable macroeconomic strategy response. Methods: To ascertain the possible economic impact of COVID-19 globally, this study examines the effect of COVID-19 on major stocks indices across the globe. Using a random sampling technique, we selected thirty (30) world stock market indices in different countries infected with COVID-19 from 31 st Dec 2019 to 25 th Mar 2020. However, not like a high percentage of previous studies that focus on the regional stock market, we examine the information on daily reported COVID-19 cases and stock market fluctuation over thirty stock market indices that houses the stock prices of several countries around the globe. Also, we estimate the monetary loss within the period, project the future surge of this pandemic on the stock market and outline some portfolio allocation strategies to help the investor hedge against investment risk. Findings: The experimental results in this study show that even a controlled outbreak of the COVID-19 can significantly influence the world's economy in both the short-term and longterm. Our obtained results of COVID-19 associated economic loss echoed in stock prices movements advise that the cost can escalate severely and quickly into global economic stress. Hence, we conclude by outlining some measure that might help investors hedge against such risk using portfolio allocation strategies.

The impact and role of COVID-19 uncertainty: A global industry analysis

“…Other recent studies report negative stock market reactions, increased systematic risk and increased market volatility in response to COVID-19 infections and deaths ( Adekoya & Nti, 2020 ; Al-Awadhi et al, 2020 ; Albulescu, 2020 ; Ashraf, 2020b ; Bai, Wei, Wei, Li, & Zhang, 2020 ; Cepoi, 2020 ; Haroon & Rizvi, 2020 ; Salisu, Akanni, & Raheem, 2020 ; Salisu, Sikiru, & Vo, 2020 ; Sharif et al, 2020 ; Wang & Enilov, 2020 ; Zhang, Hu, & Ji, 2020 ). Al-Awadhi et al (2020) report a negative association between the growth in COVID-19 cases and deaths and returns on Chinese stock markets.…”

“…Secondly, we contribute to the literature on the role of uncertainty in general and particularly COVID-19 uncertainty. Recent studies investigate other aspects of stock market responses to COVID-19 including growth expectations as measured by dividends ( Gormsen & Koijen, 2020 ), responses to COVID-19 cases and deaths ( Adekoya & Nti, 2020 ; Al-Awadhi, Al-Saifi, Al-Awadhi, & Alhamadi, 2020 ; Alfaro, Chari, Greenland, & Schott, 2020 ; Ali, Alam, & Rizvi, 2020 ; Ashraf, 2020b ; Capelle-Blancard & Desroziers, 2020 ; Salisu & Akanni, 2020 ), asset price spirals ( Caballero & Simsek, 2020 ), the impact of government responses to the pandemic ( Aggarwal, Nawn, & Dugar, 2021 ; Ashraf, 2020a ; Narayan, Phan, & Liu, 2020 ; Ozili & Arun, 2020 ; Zaremba, Kizys, Aharon, & Demir, 2020 ), contagion ( Uddin, Yahya, Goswami, Ahmed, & Lucey, 2020 ) as well as investor behaviour such as herding ( Dhall & Singh, 2020 ; Espinosa-Méndez & Arias, 2021 ; Kizys, Tzouvanas, & Donadelli, 2021 ; Ukpong, Tan, & Yarovaya, 2021 ). 1…”

How Main Stock Exchange Indices React to Covid-19 Pandemic: Daily Evidence from East Asian Countries

“…It is thought that these figures reflect the pandemic very well and using the cumulative figures may be misleading. Moreover, a negative relationship between the pandemic indicators and the main indices is expected by considering recent studies (Adekoya and Kofi Nti 2020;Ahmed 2020;Al-Awadhi et al 2020;Ali, Alam, and Rizvi 2020;Ashraf 2020;Bahrini and Filfilan 2020;Baker et al 2020;Chowdhury and Abedin 2020;Corbet et al 2020;Engelhardt et al 2020;Erdem 2020;Gherghina, Armeanu, and Joldeș 2020;Kartal, Depren, and Kılıç Depren 2020;Liu et al 2020;Mazur, Dang, and Vega 2020;Narayan, Phan, and Liu 2020;Phan and Narayan 2020;Shehzad, Xiaoxing, and Kazouz 2020;Topcu and Gulal 2020;Zhang, Hu, and Ji 2020;Akhtaruzzaman, Boubaker, and Şensoy 2020a). However, there can be neutral nexus between the pandemic indicators and the main indices if the pandemic becomes very common and spreads to every country and it is perceived as a normal part of daily life.…”

A mini-review of machine learning in big data analytics: Applications, challenges, and prospects

“…Countless ML algorithms are available freely for performing ML tasks, like classification, regression, clustering, dimensionality reduction, and ranking. To name a few, SVM, ANN, DT, Naive-Base (NB), Tensor Auto-Encoder (TAE), Ensemble Learning (EL), KNN, Hidden Markov Model (HMM), Singular-Value Decomposition (SVD), Radial Basis Function Neural Network (RBF-NN), Principal Component Analysis (PCA), Generative Adversarial Networks (GANs), Natural Language Processing (NLP), Recurrent Neural Network (RNN), Bidirectional Gated Recurrent Unit Reference Application area [10,[20][21][22][23] Finance and stock market [24][25][26] Energy system forecasting and faults detection [27][28][29] Healthcare [30][31][32][33] Teaching and learning [34][35][36] Agriculture (crop yields, emissions, and disease detection) [37] Transportation [38] Petrology (Bi-GRU)…”