Title: The COVID-19 pandemic and ethical stock markets
Authors: Fredj Jawadi - University of Lille (France) [presenting]
Nabila Jawadi - IPAG Paris Business School (France)
Abdoulkarim Idi cheffou - EDC Paris Business School (France)
Abstract: The evolution of stock returns is assessed for two classes of ethical investments: Islamic and sustainable funds, over the period 2001-2021 that covers technological (the dot-com bubble crash in 2000), financial (the 20082009 global financial crisis), and healthcare (the COVID-19 pandemic) shocks. Second, we analyze the dynamics of the financial returns of conventional and ethical markets in the COVID-19 context and model the impact of COVID-19 news on these investments. Hence, we perform different time-series analyses by applying distinct time-varying tests and estimated an ARX-GARCH model to apprehend market reactions to the COVID-19 pandemic. Accordingly, we present two interesting results. First, the COVID-19 pandemic has had a time-varying impact on the stock market, evolving with the progression of the pandemic. Basically, a close to zero effect was observed at the early stage of the pandemic, followed by a negative and significant effect during the first wave between March 2020 and June 2020. However, this has since been attenuated owing to social restriction measures, teleworking, government stimulus policies, and massive vaccine rollouts. Second, among all markets, the Islamic stock market is the most resilient and least impacted by the pandemic, suggesting evidence of a new moral shock.