COVID-19 PANDEMIC AND FINANCIAL MARKET VOLATILITY; EVIDENCE FROM GARCH MODELS

This study investigates the impact of the COVID-19 pandemic on financial market volatility using daily time series data of Bitcoin, the EUR, the S&P 500, Gold, Crude Oil, and Sugar from November 2018 to May 2023. The primary objective is to analyse volatility dynamics and identify the most suitable model for capturing these trends. Utilising GARCH (1, 1), GJR-GARCH (1, 1), and EGARCH (1, 1) models, this study examines the persistence, asymmetry, and influence of pandemic-related shocks on market volatility. The findings reveal high volatility persistence across financial markets, with significant positive asymmetric behaviour observed in Crude Oil and the S&P 500 index. EGARCH emerged as the most effective model for pre-pandemic volatility, while all GARCH models captured pandemic-induced volatilities effectively. The study concludes that the COVID-19 pandemic amplified financial market turbulence, emphasising the need for robust risk management strategies. Policymakers and investors are advised to prioritise portfolio diversification and leverage advanced econometric models to effectively navigate crises. The recommendations include integrating dynamic risk management frameworks and stress-testing mechanisms to enhance market resilience. This research contributes to the growing body of knowledge on the interplay between global crises and financial market behaviour, offering valuable insights for mitigating future uncertainties