Global Journal of Human Social Science, E: Economics, Volume 23 Issue 2

Impact of COVID-19 on Stock Market Volatility and Forecast using ARIMA and EGARCH Aminu Osman α , Anthony Abaidoo σ , Justina Antwi-Konadue ρ & Frances Kwaw Andoh Ѡ Abstract- Investors are not only interested in the average return on a stock but how risky to hold the assets. It is obvious that COVID-19 has caused unprecedented global economic crises. The study forecast stock amidst the negative shock of COVID-19 and also examine the effect of novel COVID-19 on the stock exchange market by employing ARIMA and EGARCH model using daily data of Ghana Stock Exchange Composite Index from October 2017 to February 2021. It was revealed that the bad news of COVID-19 did not significantly impact on the volatility of the stock. Forecast of the stock shows that the Ghana stock exchange composite index will experience a spiral decrease down till the end of 2021. There was evidenceof the presence of volatility in the stock and hence risk-adverse investors must be wary of their investment of stock. Measures must also be taken to make the Ghana stock exchange composite index more attractive. Investors still exercised restrain despite the government dramatic measures to contain the spread of the pandemic. Keywords: covid-19, stock exchange, composite index, autoregressive, moving average, ARIMA, GARCH. I. I ntroduction OVID-19 crises add up to several crises that have hit the globe. Counting the likes of World WarI and II and the great depression, the great recession, and Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2). The COVID-19 spread has travelled more than 150 countries andstill spreading. By February 2021, globally, the pandemic had reached a case count of 113,467,303 people with a recorded death of 2,520,550 people (WHO, 2021). Governments all over the worldhave strived to contain the shocks. Countries across the globe adopted a series of containment measures to curb the spread of the novel coronavirus. Some of these strategies include the closureof borders and schools, restrictions on internal and international travel, washing hands with soap under running water with the aid of handwashing stations, use of hand sanitizer, social distancing,lockdown and the rest. These containment measures were to limit the spread of the virus but haveunfortunately been attributed to the cause of shocks experienced by firms. Countries have succeeded through these containment measures to successfully rein the virus but unfortunately, the restrictions have hit firms’ operations hard. In Africa, Agribusiness has been constrained in access to production inputs and a market for sales of products as a result of the restrictions imposed (Lakuma & Sunday, 2020). Markets were closed down, borders were closed, social distancing became a compulsory practice for everyone, and suspicion resulted in quarantines. Especially for small enterprises who could not innovate responsively to the shocks, they were either closed temporarily or recorded little sales, and hence large declines in business activities were more felt compared to the medium and large-scale enterprises (Lakuma & Sunday, 2020). The agricultural and manufacturing sectors have also suffered various levels of shocks. Business enterprises were encouraged to provide an enabling environment by the provision of handwashing centers and equipment, sanitizer, and lodging of employees within the premises of the business ifthey were to stay in business. The result of all these consequences have showcased in the massive unemployment rate across countries especially the fragile economies. If countries are to keep or increase the containment measures in a response to the risk pose by COVID 19, unemployment is will keep increasing denying a lot of households a livelihood. In the United State, unemployment shot up from 3.8% to 13.5% in May (Kochhar, 2020). The effect of the pandemic on Ghana is not far from the stories in other countries. This is because COVID-19 is a covariate risk and due to the lockdown of production and economic activities, countries do not benefit from cheaper oil and other commodities. The top ten most heat countries of COVID-19 include the United States of America, India, Brazil, Russia, Colombia, Peru, Spain, Mexico, Argentina, and South Africa. Below is the case count of COVID-19 worldwide by continent and country. By 28 th September, the world has reordered a total of thirty- three million cases with an average recovery of the rate of 74.5% which varied across countries and continents from 0.3% to 97.5%. Despite the fact that COVID-19 incidence is new, some newspapers and quite some articles like the work of Kahn et al. (2020) have given the subject area some discussions. Many corporate companies and national leadership of business interest have been interested in understanding sources of risk that could arise from this pandemic. Amidst the presence of COVID-19, the study seeks to forecast the volatility of the Ghana stock exchange composite index and examine the presence of C Volume XXIII Issue II Version I 51 Global Journal of Human Social Science - Year 2023 ( )E © 2023 Global Journals Author α : School of Economics, University of Cape Coast, Ghana. e-mail: aminu.osman@stu.ucc.edu.gh