Did COVID-19 change spillover patterns between Fintech and other asset classes?

This study examines the spillover effect between financial technology (Fintech) stocks and other financial assets (gold, Bitcoin, a global equity index, crude oil, and the US Dollar) during the COVID-19 crisis. Employing daily data from June 2019 to August 2020, our empirical analysis shows that the outbreak of COVID-19 exacerbated volatility transmission across asset classes, while subsequent decreases in new confirmed cases globally reduced the intensity of these spillovers. The evidence for the USD and gold supports their safe haven properties during catastrophic events, while innovative technology products as represented by a financial technology index (KFTX) and Bitcoin were highly susceptible to external shocks. These results show that when push comes to shove, the buck stops with the USD and gold and that the exorbitant privilege enjoyed by the USD prevailed during the COVID-19 pandemic.     

Impact of COVID-19 on stock market efficiency: Evidence from developed countries

This study investigates the impact of the novel coronavirus (COVID-19) pandemic on stock market efficiency for six hard-hit developed countries, namely, the United States (US), Spain, the United Kingdom (UK), Italy, France, and Germany. Applying the wild bootstrap automatic variance ratio test on daily stock market data from July 29, 2019 to January 25, 2021, it is found that all stock markets used in this study deviate from market efficiency during some periods of the pandemic. Deviations from market efficiency are seen more in the stock markets of the US and UK during the COVID-19 outbreak than in other stock markets. These results are strengthened when a different econometric method, the automatic portmanteau test, is used. The findings of this study indicate an increasing chance for stock price predictions and abnormal returns during the COVID-19 pandemic.     

Chinese jigsaw: Solving the equity market response to the COVID-19 crisis: Do alternative asset provide effective hedging performance?

Against COVID-19 risks, this paper examines the hedging performance of alternative assets including some financial assets and commodities futures for the Chinese stock market in a multi-scale setting. Dynamic conditional correlations and optimal hedge ratios of the Shanghai stock exchange with Bitcoin, Dow Jones Industrial Average, Gold, WTI, Bonds and VIX returns are estimated before and during the pandemic crisis. In the short-term, the use of wavelet decomposition shows that Bitcoin provides the best hedge to the Shanghai stock market. In the long-term, commodities dominate. Whereas WTI offers the highest hedging effectiveness, Gold ranks second by a slight margin. These results allow investors to choose the highest returns and protecting tail risk during the current sanitary crisis. Our findings suggest particularly more pronounced economic benefit of diversification including alternative financial assets while commodities futures serve as good hedge assets especially during unpredictable crisis like the current sanitary crisis relating to the covid-19.     

COVID-19, government interventions and emerging capital markets performance

In this study, we explore the impact of government intervention to contain the spread of COVID-19 in emerging countries on the performance of their leading stock indices. We retrieved data on the performance of 25 international capital market indices included in the MSCI Emerging Markets Index and data about the closures, economic, and health measures imposed in each country examined. Overall, our findings show that government restrictions are associated with negative market returns, possibly due to the anticipated adverse effect to the economy. The adverse effect is more evident when closures are imposed. The market response to economic stimulus is mild but varies depending on the type of intervention imposed, much as with the health measures. Public campaigns may raise public awareness about COVID-19, but they can also increase the public’s fear of the pandemic, reflected in the negative response in capital markets. The results are essential for understanding the trends and fluctuations in emerging markets during this current crisis and for preparing for crises in the future.     

Impact of the Covid-19 induced panic on the Environmental,Social and Governance leaders equity volatility: A time-frequency analysis

We apply wavelet analyses to study how the Covid-19 fueled panic influenced the volatility of ESG (environmental, social and governance) leaders’ indices encompassing the World, the USA, Europe, China, and the Emerging Markets. We document intervals of the low, medium, and high coherence between the Coronavirus Panic Index and the price moves of the ESG Leaders indices. The low coherence intervals signify the diversification potential of ESG investments during a systemic pandemic such as Covid-19. We document differences in the pattern exhibited by various geographical indices highlighting their potential role for designing cross-geography hedge strategies, both now and in the future.     

Let's lessen conditionality in times of force majeure events. The archaic righteousness of the policy of conditionality of international Institutions amid COVID-19

This article investigates how international decision-making's conditionality aids countries during strenuous economic conditions imposed by the COVID-19 pandemic. It examines and contrasts the European Union's conditionality policies, the International Monetary Fund, and the World Bank as the more influential and leading groups of institutions. The article reveals notable policy differences. As opposed to that of the IMF and WB, the EU's approach is more comprehensive and not confined to economic considerations. Those variations aside, the article draws on the same premise: expectations of compliance with the set conditions. While in-depth, structural requirements could guide ordinary decision-making and build up resilient national institutions and policies, this article questions the merits of large-scale comprehensive terms in the face of a situation created by a force majeure or a humanly uncontrollable event such as the COVID-19 pandemic. With no more initial research addressing the specific question of the application and adequacy of conditionality to force majeure emergencies or pandemic situations of the scale of COVID-19, this article argues in favor of a measured and targeted response limited to the development, design, or determination of policy choices that tackle the intended purpose. Also, for validly practical considerations that search for to ensure the better use of aid and avoid distracting or overburdening the recipient countries to the point of risking losses of devastating proportions, the article proposes to revise and limit conditionality during force majeure events to the essential aspects of transparent management of funds for the sole intended purpose. This in itself is a distinct democratic exercise of efficient and accountable public management decision-making.     

Post pandemic aviation market recovery: Experience and lessons from China

China was the first aviation market in the world hit hard by COVID-19 and has been recovering gradually as the pandemic became largely under control within mainland China. This study reviews the recovery pattern influenced by the Chinese government's aviation policy choices, in the hope that our discussions and findings will help improve aviation policy responses elsewhere. While the domestic market in mainland China has enjoyed a quick recovery to about 80% of the pre-crisis level by July 2020, the recovery of international services has been much slower, due to the bilateral route and flight frequency/capacity control and strict requirements for health check and quarantine. China's domestic aviation market was recovered by about 80% in two months after the pandemic became under good control. Most other countries with a “curve flattening” strategy, instead of full pandemic control, may not expect the fast recovery path China has achieved. A British “travel corridor” approach may be more practical for Western countries to follow, albeit more likely to be subject to serious setbacks and disruptions. The aviation fee reductions and cost support China and many other countries have been using are helpful by reducing airlines' marginal costs, but not sufficient for carriers to return to profitability or sustainable operations. Capital injection and/or credit guarantee may be needed for many airlines to survive. With various, often uncoordinated, regulations imposed in international markets, airlines based in open economies that have small domestic markets will face particularly serious challenges during the recovery process.     

COVID-19 pandemic and prospects for recovery of the global aviation industry

The COVID-19 pandemic ushered a wave of economic decline across the world due to disruptions in the supply and demand chain for the travel market. This study examines potential recovery pathways from the global aviation industry following the severe negative impacts of the COVID-19 pandemic. Using archival and secondary data mainly from Flightradar24, ICAO, IATA and EUROCONTROL, the study found that the pandemic inflicted a heavy toll on global aviation, which resulted in ratings downgrades, liquidation and bankruptcy of several airlines and airports due to severe cash burn instigated by travel restrictions. Although the industry is opening up, the recovery process seems much slower than anticipated, which could see more jobs and airlines failing in the absence of relevant support. The study recommends that as the sector opens up, it does so in a responsible manner, which puts measures that protect travellers, reduce costs, increase efficiency, and ensure a quality customer experience anchored on employees' health and customer safety. Recovery should also occur with the view to build back better in line with the provisions of the Sendai Framework for Disaster Risk Reduction and at the same time responding to the dictates of Agenda 2030 on sustainable development goals (SDGs).     

Strategic responses by European airlines to the Covid-19 pandemic: A soft landing or a turbulent ride?

The coronavirus (COVID-19) pandemic has dramatically affected the aviation industry. This paper investigates how 20 European airlines communicated their crisis messages during the pandemic by employing Situational Crisis Communication Theory (SCCT) to airline responses. This qualitative study consisting of a systematic review and content analysis, examined 7237 messages from social media channels and press releases posted between December 1, 2019, and May 25, 2020, when the crisis unfolded worldwide. The results indicate that the airlines primarily emphasized instructing and adjusting crisis communication strategies. Further, Twitter replaced Facebook as the primary communication channel. This study provides insights on how airlines can and should communicate crisis-related messages amidst a severe pandemic. The study concludes with the implications of these findings and recommendations for airline stakeholders moving forward.