Research Article
GARCH Effect and Abnormal Returns during COVID-19 Pandemic
@INPROCEEDINGS{10.4108/eai.1-10-2020.2305564, author={Elok Heniwati}, title={GARCH Effect and Abnormal Returns during COVID-19 Pandemic}, proceedings={Proceedings of the First International Conference of Economics, Business \& Entrepreneurship, ICEBE 2020, 1st October 2020, Tangerang, Indonesia}, publisher={EAI}, proceedings_a={ICEBE}, year={2021}, month={4}, keywords={covid-19 indonesia capital market garch volatility}, doi={10.4108/eai.1-10-2020.2305564} }- Elok Heniwati
Year: 2021
GARCH Effect and Abnormal Returns during COVID-19 Pandemic
ICEBE
EAI
DOI: 10.4108/eai.1-10-2020.2305564
Abstract
Considering that in general stock returns display time-varying volatility, researchers focus on how abnormal returns are calculated because it impacts on how it will be interpreted. This study uses a market model for the GARCH effect to obtain a more efficient estimation result. Using the sample of bank stocks, we empirically investigate how this adjustment impacts the magnitude of the abnormal return associated with the COVID-19 event. The results show that the calculation of abnormal returns taking into account the GARCH effect results in a more widespread than OLS. It suggests that the traditional market model should be sharpened for conditional heteroscedasticity when calculating abnormal returns during the COVID-19 outbreaks.
