COVID-19 Pandemic: Stock Markets Situation in European Ex-Communist Countries

Dorota Zebrowska-Suchodolska, Andrzej Karpio, Krzysztof Kompa
European Research Studies Journal, Volume XXIV, Issue 3, 1106-1128, 2021
DOI: 10.35808/ersj/2408


Purpose: The aim of this article is to present the impact of the COVID-19 pandemic on the capital markets of post-communist economies and, whether these markets are reacting in the same way. The research concerns indices of stock exchanges in Poland, Hungary, Latvia, Lithuania, Bulgaria, Czech Republic, Romania, Estonia, Croatia, and Slovenia. Methodology: The investigation covers the period from 30 SEP 2019 to 31 DEC 2020 divided into three sub-periods - pre-pandemic, pandemic shock, and pandemic stabilization. A trend analysis of the indices studied and a volatility analysis of the returns of the indices were conducted. Econometric trend models and GARCH-class models were applied. Findings: As a main finding it can be concluded that the capital markets of the post-communist economies responded to the pandemic in an analogous way, as well as that the scale and level of development of stock markets does not affect their response to the pandemic and stock market prosperity during the pandemic period. Practical Implications: The work focuses on the analysis of major stock market indices in countries with very different levels of capital market development. The course of the pandemic varies from country to country in terms of freezing the economy. As a consequence, it allows answering the fundamental question from the economic point of view: To what extent does a crisis of a non-economic nature affect the stock exchange situation in countries at the stage of capital market development? Originality/Value: The analysis of the level of capital markets development in post-communist countries has been the subject of many works, including by authors. However, the emergence of a pandemic creates a unique (hopefully) opportunity for research under extreme conditions such as the pandemic. As a consequence, information is obtained about the economic resilience, or lack thereof, of post-communist countries to crisis situations of a non-economic nature.

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