1 July 2021

Research pick: COVID-19 and the BRIC stockmarkets - "Impact of COVID on the stock market: a study of BRIC countries"

A new study published in the International Journal of Financial Markets and Derivatives has investigated the impact of the COVID-19 pandemic on the stock markets in so-called BRIC countries of Brazil, Russia, India, and China. These nations are considered to be the rapidly growing economies with the biggest potential.

The researchers, Varuna Kharbanda and Rachna Jain of the Maharaja Agrasen Institute of Management Studies in Delhi, India, suggest that for the period of the pandemic studied the incidence of infections with the novel coronavirus, SARS-CoV-2, which caused the potentially lethal disease COVID-19, correlated with negative effects on the stock markets of those countries. Moreover, falls in share prices were partly blamed on pessimism in the wake of the early stages of the pandemic up to the end of May 2020.

An unprecedented modern pandemic with millions of symptomatic infections and many hundreds of thousands of deaths was inevitably to have a detrimental effect on world economies. Given that the BRIC nations account for almost 40% of the world population, 25% of the world landmass, and 20% of the total world gross domestic product (GDP), the impact of the COVID-19 pandemic would have an enormous impact on those nations individually and in terms of their position in the global picture.

The research highlights just how volatile the markets are as they respond to the pandemic, this was true at the beginning and is still true at the time of writing of this Research Highlight. The team used two multivariate models to track this volatility from a point well before the pandemic in the summer of 2019 to almost the middle of 2020 well after we had begun to recognise the unfolding tragedy of this disease.

The governments of the BRIC nations have responded with relief packages, new tax rules, and by easing credit in their economies. However, the negative effects are still being felt and it is impossible to predict at this point, first, when the pandemic will end and what the long-term impact on BRIC economies and the global economy will be.

Kharbanda, V. and Jain, R. (2021) ‘Impact of COVID on the stock market: a study of BRIC countries’, Int. J. Financial Markets and Derivatives, Vol. 8, No. 2, pp.169–184.

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