RMIT expert available for comment on impact of prior experience of a pandemic in stock markets’ responses to COVID-19

RMIT expert available for comment on impact of prior experience of a pandemic in stock markets’ responses to COVID-19

Angel Zhong (0433 810 413 or angel.zhong@rmit.edu.au)

Topics: COVID-19, SARS 2003, spillover, learning, stock market and government responses to the pandemic, volatility contagion

“International investors seeking diversification should consider a country’s prior experience of a pandemic when choosing markets.

“Our research shows that stock markets in countries which have experienced SARS have exhibited lower volatility connectedness to the global financial markets.

“COVID-19 has caused significant disruption to global financial markets.

“No other pandemic has had such an influence, resulting in a rapid build-up of volatility and return contagion during the pandemic.

“However, this has been less the case in stock markets of countries that reported deaths due to SARS in 2003.

“These countries have reacted to COVID-19 more quickly, showing lower return and volatility connectedness to global financial markets.

“This is related to imprint theory in psychology, such that investors with early experience in similar health crises have tended to react more quickly to COVID-19.

“That means stock markets with prior experience of SARS appear to be a good choice for diversification, given the lower turbulence due to systemic economic shocks to global financial markets.

 “This is important in the perspective of systemic stability of the global financial system.

“It also has significant implications for international investors, in that they should consider stocks that minimise the risk of their portfolios.”

The RMIT and Massey University study compared G20 countries over 4 months since COVID-19 started.

Angel Zhong is a Senior Lecturer in Finance in the School of Economics, Finance and Marketing at RMIT University. Her research focuses on investment and investor behaviour in share markets around the world and on behavioural biases of both individual and institutional investors in share markets.

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For media enquiries, please contact RMIT Communications: 0439 704 077 or news@rmit.edu.au

21 September 2020

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21 September 2020

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