This study aims to investigate the effects of government interventions on stock market performance of six countries within the ASEAN region that experienced the greatest impact during the COVID-19 pandemic in two aspects: stock returns and stock volatilities. The paper uses government response index and its components, including stringency index, containment and health index and economic support index as proxies for government actions. The paper first applies the GARCH(1,1) model to extract the volatilities of the studied stock markets. Subsequently, a panel regression model with fixed random effect is adopted to analyze how the performance of stock markets is influenced by government policy responses. The empirical results suggest that government’s interventions exert positive, significant effect on the stock returns of ASEAN markets. Additionally, the stock markets are more volatile under the implementation of restriction policies and containment and health policies, whereas the economic support policies are associated with decreased volatilities. The overall effect of government response policies also boosts the volatility of ASEAN stock markets. Our findings provide essential and reliable evidence for policymakers and stakeholders to alleviate the profound impact of the widespread COVID-19 outbreak.

government’s responses; COVID-19; ASEAN countries; GARCH(1,1); stock market performance

Aharon, D. Y., & Siev, S. (2021). COVID-19, government interventions and emerging capital markets performance. Research in International Business and Finance, 58, 101492. https://doi.org/10.1016/j.ribaf.2021.101492

Al-Awadhi, A. M., Alsaifi, K., Al-Awadhi, A., et al. (2020). Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns. Journal of Behavioral and Experimental Finance, 27, 100326. https://doi.org/10.1016/j.jbef.2020.100326

Albulescu, C. T. (2021). COVID-19 and the United States financial markets’ volatility. Finance Research Letters, 38, 101699. https://doi.org/10.1016/j.frl.2020.101699

Alexakis, C., Eleftheriou, K., & Patsoulis, P. (2021). COVID-19 containment measures and stock market returns: An international spatial econometrics investigation. Journal of Behavioral and Experimental Finance, 29, 100428. https://doi.org/10.1016/j.jbef.2020.100428

Ashraf, B. N. (2020). Economic impact of government interventions during the COVID-19 pandemic: International evidence from financial markets. Journal of Behavioral and Experimental Finance, 27, 100371. https://doi.org/10.1016/j.jbef.2020.100371

Baker, S. R., Bloom, N., Davis, S. J., et al. (2020). The Unprecedented Stock Market Reaction to COVID-19. The Review of Asset Pricing Studies, 10(4), 742–758. https://doi.org/10.1093/rapstu/raaa008

Bakry, W., Kavalmthara, P. J., Saverimuttu, V., et al. (2022). Response of stock market volatility to COVID-19 announcements and stringency measures: A comparison of developed and emerging markets. Finance Research Letters, 46, 102350. https://doi.org/10.1016/j.frl.2021.102350

Baltagi, B. H. (2008). Econometric analysis of panel data. John Wiley & Sons Ltd., Chichester.

Bell, A., & Jones, K. (2014). Explaining Fixed Effects: Random Effects Modeling of Time-Series Cross-Sectional and Panel Data. Political Science Research and Methods, 3(1), 133–153. https://doi.org/10.1017/psrm.2014.7

Bersvendsen, T., & Ditzen, J. (2021). Testing for slope heterogeneity in Stata. The Stata Journal: Promoting Communications on Statistics and Stata, 21(1), 51–80. https://doi.org/10.1177/1536867x211000004

Bickley, S. J., Brumpton, M., Chan, H. F., et al. (2021). The stabilizing effect of social distancing: Cross-country differences in financial market response to COVID-19 pandemic policies. Research in International Business and Finance, 58, 101471. https://doi.org/10.1016/j.ribaf.2021.101471

Bollerslev, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of econometrics, 31(3), 307–327. https://doi.org/10.1016/0304-4076(86)90063-1

Bollerslev, T., Chou, R. Y., Kroner, K. F. (1992). ARCH modeling in finance: A review of the theory and empirical evidence. Journal of econometrics, 52(1-2), 5–59. https://doi.org/10.1016/0304-4076(92)90064-X

Bouri, E., Naeem, M. A., Nor, S. M., et al. (2021). Government responses to COVID-19 and industry stock returns. Economic Research-Ekonomska Istraživanja, 35(1), 1967–1990. https://doi.org/10.1080/1331677x.2021.1929374

Chang, C.-P., Feng, G.-F., & Zheng, M. (2021). Government Fighting Pandemic, Stock Market Return, and COVID-19 Virus Outbreak. Emerging Markets Finance and Trade, 57(8), 2389–2406. https://doi.org/10.1080/1540496x.2021.1873129

Engle, R. (2001). GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics. Journal of Economic Perspectives, 15(4), 157–168. https://doi.org/10.1257/jep.15.4.157

Gil-Alana, L. A., & Claudio-Quiroga, G. (2020). The COVID-19 impact on the Asian stock markets. Asian Economics Letters, 1(2). https://doi.org/10.46557/001c.17656

Hale, T., Angrist, N., Goldszmidt, R., et al. (2021). A global panel database of pandemic policies (Oxford COVID-19 Government Response Tracker). Nature Human Behaviour, 5(4), 529–538. https://doi.org/10.1038/s41562-021-01079-8

Hansen, P. R., & Lunde, A. (2005). A forecast comparison of volatility models: does anything beat a GARCH(1,1)? Journal of Applied Econometrics, 20(7), 873–889. https://doi.org/10.1002/jae.800

He, P., Sun, Y., Zhang, Y., et al. (2020). COVID–19’s Impact on Stock Prices Across Different Sectors—An Event Study Based on the Chinese Stock Market. Emerging Markets Finance and Trade, 56(10), 2198–2212. https://doi.org/10.1080/1540496x.2020.1785865

Ibrahim, I., Kamaludin, K., & Sundarasen, S. (2020). COVID-19, Government Response, and Market Volatility: Evidence from the Asia-Pacific Developed and Developing Markets. Economies, 8(4), 105. https://doi.org/10.3390/economies8040105

Indrastuti, D. K. (2021). Impact of Confirmed, Death, and Recovered Cases of COVID-19 Toward Stock Exchange Composite Index. Review of Integrative Business and Economics Research, 10, 1–10.

Khan, K., Zhao, H., Zhang, H., et al. (2020). The impact of COVID-19 pandemic on stock markets: An empirical analysis of world major stock indices. The Journal of Asian Finance, Economics and Business, 7(7), 463–474. https://doi.org/10.13106/jafeb.2020.vol7.no7.463

Kharchenko, I., Tzvetkov, P. (2013). Estimation of volatilities and spillover effects between developed and emerging market economies. Lund University Publications.

Liu, H., Manzoor, A., Wang, C., et al. (2020). The COVID-19 Outbreak and Affected Countries Stock Markets Response. International Journal of Environmental Research and Public Health, 17(8), 2800. https://doi.org/10.3390/ijerph17082800

Morales, L., & Andreosso-O’Callaghan, B. (2020). COVID-19: Global Stock Markets “Black Swan.” Technological University Dublin. https://doi.org/10.21427/GV7K-1C77

Nghi, L., & Kieu, N. (2021). Volatility spillover from the united states and Japanese stock markets to the Vietnamese stock market: A frequency domain approach. Panoeconomicus, 68(1), 35–52. https://doi.org/10.2298/pan170428003n

Park, H. M. (2011). Practical guides to panel data modeling: a step-by-step analysis using stata. Public Management and Policy Analysis Program, Graduate School of International Relations, International University of Japan, 12, 1–52.

Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of Applied Econometrics, 22(2), 265–312. https://doi.org/10.1002/jae.951

Ramelli, S., & Wagner, A. F. (2020). Feverish Stock Price Reactions to COVID-19*. The Review of Corporate Finance Studies, 9(3), 622–655. https://doi.org/10.1093/rcfs/cfaa012

Sadiq, M., Hsu, C.-C., Zhang, Y., et al. (2021). COVID-19 fear and volatility index movements: empirical insights from ASEAN stock markets. Environmental Science and Pollution Research, 28(47), 67167–67184. https://doi.org/10.1007/s11356-021-15064-1

Shanaev, S., Shuraeva, A., & Ghimire, B. (2020). The Financial Pandemic: COVID-19 and Policy Interventions on Rational and Irrational Markets. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3589557

Sharif, A., Aloui, C., & Yarovaya, L. (2020). COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach. International Review of Financial Analysis, 70, 101496. https://doi.org/10.1016/j.irfa.2020.101496

Sutrisno, S., Panuntun, B., & Adristi, F. I. (2021). Pandemic impact of COVID-19 on the stock market index and return of stock market index (event study on stock market index in ASEAN exchange). Modus, 33(1), 47–66. https://doi.org/10.24002/modus.v33i1.4068

Tahat, Y., Ahmed, A. (2020). Stock Market Returns and COVID-19 Outbreak: Evidence from the UK. Memo: University of Dundee.

Yang, H., & Deng, P. (2021). The Impact of COVID-19 and Government Intervention on Stock Markets of OECD Countries. Asian Economics Letters, 1(4). https://doi.org/10.46557/001c.18646

Zaremba, A., Aharon, D. Y., Demir, E., et al. (2021). COVID-19, government policy responses, and stock market liquidity around the world: A note. Research in International Business and Finance, 56, 101359. https://doi.org/10.1016/j.ribaf.2020.101359

Zaremba, A., Kizys, R., Aharon, D. Y., et al. (2020). Infected Markets: Novel Coronavirus, Government Interventions, and Stock Return Volatility around the Globe. Finance Research Letters, 35, 101597. https://doi.org/10.1016/j.frl.2020.101597

Zhuo, J., Kumamoto, M. (2020). Stock market reactions to COVID-19 and containment policies: A panel VAR approach. Economics Bulletin, 40(4), 3296–3305.