engleski

Covid-19 as an ultimate stock market Black Swan

The economic consequences of COVID-19 are detrimental not only to public health systems but to trade and travel, food and agriculture industries, financial markets and others. The financial markets exhibited quick fall after the outbreak of the COVID- 19 infection, which was an unprecedented stock market reaction to the biggest global pandemics in the last 100 years. Its devastating impact on economy and financial markets makes it an ultimate Black Swan event. Goal of this paper is to investigate the impact of COVID-19 disease on values of eight major stock market indices: Nikkei 225, DAX performance-index (DAX), Dow Jones Industrial Average (Dow Jones), NASDAQ Composite (NASDAQ), S&P 500, France CAC 40 Index (FCHI), FTSE 100 and FTSE MIB Index. The results of the analysis have shown that COVID-19 variables had negative impact on the values of all observed market indices. The same conclusion was brought when the COVID-19 variables were observed on the world level and on the level of individual countries, in which the certain market index is used. According to the regression results it was shown that the value of market indices has dropped roughly a month or month and a half before it should, depending on the confirmed cases of infection. This can be explained with the destructive effect of COVID-19 outbreak started in Wuhan, China in December 2019 and negative expectations on the stock markets. The results obtained from this paper can be important and relevant for market experts and investors as a guide in making investment decisions.

COVID-19 ; stock market indices ; Black Swan

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