Title: Understanding the effects of COVID-19 on regime switching behaviour of Asian stock markets

Authors: Bhaskar Bagchi; Raktim Ghosh

Addresses: Department of Commerce University of Gour Banga, Malda, 732 103, West Bengal, India ' Department of Commerce University of Gour Banga, Malda, 732 103, West Bengal, India

Abstract: The present work aims to study the regime-switching behaviour of stock indices of Asian emerging economies namely China, India, South Korea, Indonesia, Hong Kong, and Thailand that have been caused due to outbreak of the COVID-19 pandemic. The Markov Regime-Switching model identifies the switching over of the variables from one regime to another. The break-point unit root test confirms the non-existence of unit root along with the identification of structural breaks. Johansen Co-integration test and Wald test are applied to ascertain the long-run and short-run relationship. The findings from the Johansen Co-integration test and Wald test verify the existence of the associations. The Markov Switching model signifies the switching over of all the select stock indices from regime 1 to regime 2 and the magnitude of volatility in regime 2 is much more than that of regime 1.

Keywords: COVID-19; stock markets; Asian economies; Markov regime-switching model; Co-integration; Wald test; break-point unit root test.

DOI: 10.1504/IJMEF.2023.135665

International Journal of Monetary Economics and Finance, 2023 Vol.16 No.5, pp.397 - 416

Received: 11 Aug 2021
Accepted: 06 Oct 2022
Published online: 21 Dec 2023 *

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