COVID-19 outbreak and the global stock market liquidity

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Abstract

The purpose of this study is to examine how the COVID-19 outbreak affected the liquidity of stock markets across the world. By analyzing a sample including daily data from forty-seven stock markets, we found a positive relationship between monthly growth in the number of newly reported COVID-19 cases and monthly market trading volume growth during the period between December 2019 and January 2021. The research findings although contrary to the previous studies in the very early stages (McTier et al., 2013; Chaouachi & Chaouachi, 2020), are consistent with the actual developments up to the present. This implies that stock markets were relevant sources for investors to compensate for the foregone earnings caused by the interruption of economic activities. Therefore, appropriate measures, such as financial support for investors and listed companies as well as improvements in technological infrastructure and administrative procedures, should be implemented to maintain the activities of the stock market in each country. In addition, it is important for the regulators to closely monitor market trading activities and trends to issue early warnings to the market and take appropriate action in the event of a “bubble” in the market.

Keywords: COVID-19, Liquidity, Stock Market, Trading Volume

Authors’ individual contribution: Conceptualization — H.M.P.; Methodology — V.D.H.D.; Validation — V.D.H.D.; Formal Analysis — V.D.H.D.; Investigation — H.M.P. and V.D.H.D.; Resources — V.D.H.D.; Data Curation — V.D.H.D.; Writing — Original Draft — H.M.P. and V.D.H.D.; Writing — Review & Editing — H.M.P. and V.D.H.D.; Supervision — H.M.P.; Project Administration — H.M.P.; Funding Acquisition — H.M.P.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E44, G12, G14

Received: 04.02.2023
Accepted: 23.06.2023
Published online: 27.06.2023

How to cite this paper: Phan, H. M., & Dam, V. D. H. (2023). COVID-19 outbreak and the global stock market liquidity. Journal of Governance & Regulation, 12(3), 25–33. https://doi.org/10.22495/jgrv12i3art3