Electronic Theses and Dissertations (Masters/MBA)
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Item Effects of the COVID-19 pandemic on the financial markets: a comparative analysis(2021) Kapalu, NjambaThis paper investigates the effects of the COVID-19 pandemic on bond yields and stock returns. The paper examines how the coronavirus outbreak affected the performance of capital assets as well as what role financial contagion played in the evolution of asset prices over time. This paper employs an event study, a regression analysis, using both Ordinary Least Squares (OLS) and Generalised Method of Moments (GMM) estimations as well as a BEKK GARCH model to test for contagion. The research found that the flight-to-safety phenomenon was more prominent in emerging markets, whereas, in developed markets, bonds were not seen as the safe-haven assets and investors opted to invest in assets such as gold. The second event study showed that investors began reacting in anticipation of the of the Fed announcement in March to slash interest rates, showing herding behaviour rather that market efficiency was driving market behaviour during the pandemic. With regards to the effect of financial contagion being exhibited during the COVID-19 pandemic, the research had different findings for stock returns and bond yields. Using an MVGARCH BEKK model for the estimations, the research found that cross-market effects in the stock returns showed that the USA exhibited high unidirectional linkages with the other markets, thereby confirming significant effect of financial contagion in stock returns during the pandemic. With bond yields, however, no single country was found to be the source of the volatility