COVID-19 Surprise Effect and Government Response Measures on the Influence on Asset Pricing Risk among European Travel and Airline Sectors
ISBN: 978-1-80071-071-9, eISBN: 978-1-80071-070-2
Publication date: 3 September 2021
Abstract
Purpose: This work provides an empirical analysis of investor behaviour's simultaneous influence due to the surprise effect caused by COVID-19 cases and government responses to market risk. This analysis compares tourism assets risk with other sectors and different types of investors' assets and categories in Europe.
Design: The paper applies an ARIMA with a GARCH model to predict conditional volatility of models for market uncertainty. Nonlinear models, factor analysis and time series linear regression for stationary variables in first differences are applied to predict market uncertainty.
Findings: We demonstrate that market risk does not arise from COVID-19 cases but instead from the surprise effect, as the market accurately predicts future cases. Only the volatility of the sectors Travel, Airline, and Utility are influenced by both surprise effect and government response, but only the travel sector reveals an interaction effect with both government response effort and surprise effect.
Originality: The article mutually studies the simultaneous interactions among investor behaviour due to the surprised effect caused by COVID-19 and government responses to the pandemic and the influence on professional investors' volatility in two asset types and between different sectors.
Practical implications: With this model and results, investors and financial service providers may verify whether or not government intervention during pandemic periods is effective in reducing uncertainty and risk levels on sectors, types of investors and different sorts of assets.
Keywords
Acknowledgements
Acknowledgements
This work is funded by the National Funds through the FCT – Foundation for Science and Technology, I.P., within the scope of the project Refa UIDB/05583/2020. Furthermore, we would like to thank the Research Centre in Digital Services (CISeD) and the Polytechnic of Viseu for their support.
Citation
Nogueira Reis, P.M. and Pinho, C. (2021), "COVID-19 Surprise Effect and Government Response Measures on the Influence on Asset Pricing Risk among European Travel and Airline Sectors", Seabra, C., Paiva, O., Silva, C. and Abrantes, J.L. (Ed.) Pandemics and Travel (Tourism Security-Safety and Post Conflict Destinations), Emerald Publishing Limited, Leeds, pp. 121-139. https://doi.org/10.1108/978-1-80071-070-220211008
Publisher
:Emerald Publishing Limited
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