A research paper co-authored by Dr Sheeja Sivaprasad, Principal Lecturer in Finance at the University of Westminster, sheds new light on how the COVID-19 pandemic has affected the stock markets of G7 countries.

Graphs representing the stock market crash caused by COVID-19

According to the paper, the uncertainty arising from the COVID-19 pandemic has caused an increase in stock market volatility across the G7 countries dramatically. G7 countries consist of the seven largest IMF-advanced economies in the world, including Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. 

In addition to the stock markets, the research also explored the impact of COVID-19 on specific sectors including Consumer Goods, Consumer Services, Financials, Healthcare, Industrials, Materials, Oil and Gas, Technology and Telecommunications and Utilities. The researchers found strong evidence of a crisis in all countries and sectors, suggesting a universal impact from the pandemic. However, not all business sectors were affected with the same intensity or at the same time.

For example, oil, gas and financials were the first sectors to show an impact. COVID-19 volatility represents a demand-driven crisis, with oil and gas as primary inputs for travel. Financials faced the impact of bankruptcies across the real economy.

The researchers identified the Health Care and Consumer services sectors as the most severely affected, which they found to be a reflection on the COVID-19 drug-race and the dire situation of airlines. Telecommunications and Technology were among those that were hit latest and the least severely, as those in lockdown searched for distraction and entertainment online. They also found that the UK and the US were the worst hit countries out of the G7.

The study was undertaken by researchers from the University of Westminster, Queen Mary University of London, the University of Kent and Lancaster University Management School.

Talking about the research, Dr Sheeja Sivaprasad said: “In our opinion, this is the first study that examines the effects of the pandemic across key global markets such as that of the G7. It is relevant as it undertakes sectoral investigation to analyse which sectors were affected first and worst relative to others.”

Read the full paper on the SSRN website.

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