STOCK MARKET VOLATILITY IN ZIMBABWE STOCK EXCHANGE DURING PANDEMIC PERIOD

Abstract

Volatility is essential to consider uncertainty surrounding investments in financial assets. For this reason, financial industry regulators, mutual fund managers, individual and institutional investors, and policymakers are concerned about volatility. Against this background, this paper investigates the volatility of returns on the Zimbabwean stock market between January 2020 and January 2022. We use the All Shares Index for Zimbabwe Stock Exchange (ZSE) for volatility analysis and perform the quantitative investigation using GARCH family models. According to the AIC and SIC criterion, we use the GARCH (1,1) model and perform a complete analysis considering the results obtained from EGARCH (1,1) and IGARCH (1,1) regressions. Results report persistence in volatility, showing that it takes time for the market to digest information into the prices fully, and the shocks to conditional variance take longer to die out. Also, an asymmetry exists, implying that bad news and good news impact differently on the stock market, and the magnitude of volatility due to the good news is higher than bad news. Therefore, we conclude that positive news of the same magnitude impacts more than bad news. Investors rely more on the good news for effective decisions during the pandemic to earn more. Considering the results, any policy aimed at reducing the impact of the pandemic is favorable for investment.