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Stock market
Is stock market in Sub-Saharan in Sub-
Africa resilient to health shocks? Saharan Africa
Terver Kumeka, Patricia Ajayi and Oluwatosin Adeniyi
Department of Economics, University of Ibadan, Ibadan, Nigeria

Received 10 March 2021

Abstract Revised 25 May 2021
Purpose – This paper aims to examine the impact of health and other exogenous shocks on stock markets 17 July 2021
23 September 2021
in Africa. Particularly, the authors examined the resilience of the major stock markets in 12 African economies 14 November 2021
during the recent global pandemic. 18 November 2021
Design/methodology/approach – This paper uses the recent panel vector autoregressive model, which Accepted 18 November 2021
enables us to capture the response of stock markets to shocks in COVID-19, commodity markets and
exchange rate. For robustness, the authors also analysed the panel Granger causality test. Data was obtained
for the period ranging from 2 January 2020 to 31 December 2020.
Findings – The results show that the growth in COVID-19 cases and deaths do not have any substantial
impact on the stock market returns of these economies. In terms of commodity markets, the authors find that
gold price has a negative contemporaneous effect on stock returns, but the effect fizzles out around the fifth
day while crude oil price, on the other hand, has a significant positive simult aneous impact on stock returns
and also converges around the fifth day. The authors further find that the exchange rate has a
contemporaneous and nonlinear effect on stock returns and seems to be more dramatic when compared with
the other variables. Overall, the results show that stock markets in Africa appear to be flexible and resilient
against the COVID-19 outbreak but are affected by other exogenous shocks such as volatile commodity prices
and the foreign exchange market. The effect is, however, short-lived – between one to five days.
Practical implications – Following the study’s findings, policies should be put in place to support
financial markets by way of hedging against commodity instability and securing domestic currency
financing. Policymakers are also recommended to concentrate on managing the uncertainties around their
exchange rate markets and develop robust and efficient domestic financial markets to encourage local and
foreign investors.
Originality/value – Several studies have been carried out on the effects of disasters (such as the COVID-19
pandemic) on stock markets, but only a few studies have examined the resilience of stock markets to health
and other exogenous shocks. This study’s attempt is not only to examine the impact of COVID-19 health
shocks on stock markets but also to analyse the resilience of the sampled stock markets. The authors also
analyse the resilience of stock markets to commodity markets and exchange rates shocks.
Keywords Resilience, Stock returns, Exchange rate, Commodity markets, PVAR, COVID-19
Paper type Research paper

1. Introduction
Following the outbreak of the novel Coronavirus – SARS-CoV-2 (popularly called COVID-
19) in Wuhan China in December 2019, over 3 million people have been infected, with more
than 100,000 deaths in Africa (Africa Centre for Disease Control, 2020). Globally, 140, 322,
903 COVID-19 cases have been reported, with 3,003,794 reported deaths, while vaccination
jabs have been given to a total of 751,452,536 as of 15 April 2021 (World Health
Organization, WHO, since 2:35 p.m. CEST, 18/04/2021). Several countries in Africa have

Journal of Financial Economic

JEL classification – G41, F31, G10, G15 Policy
Conflicts of interest/competing interests: All authors do not have any financial interest or non- © Emerald Publishing Limited
1757-6385
financial interest. DOI 10.1108/JFEP-03-2021-0073
JFEP taken diverse measures to contain, including quarantine, restriction of movement and
several monetary and fiscal policies to curtail the health and economic implications of the
virus. Some of these actions and reactions have unfavourable effects on the African
economy, especially the financial markets. The fall in major equity markets in the world,
disruption in the supply chain and lack of consumer confidence have resulted in distortions
in major stock markets in Africa (Alola and Bekun, 2020; Alola et al., 2021).
In the earlier periods, COVID-19 had its most negative toll on African economies most
inclined to foreign investors as investments were pulled back by international financiers.
Most stock markets in Africa were heavily affected as financing plunged in the early part of
2020, following the withdrawal of foreign funds. The abrupt descent in production and other
international activities following the lockdown of major economies in the world indicated
the importance of having strong and liquid domestic markets that can endure exogenous
and/or unanticipated shocks (IMF, 2020; Absa Africa Financial Markets Index, 2020).
Different governments, central banks and financial authorities have put in place various
social and economic measures by supporting the domestic debts markets with different
tools, to repel the impact of the pandemic. However, the outlook in the medium to long-terms
is majorly dependent on the magnitude to which domestic and international economic
activities will take up again, but current advancement made in financial markets
development will only serve to improve Africa’s chances of having a speedy and sustainable
recovery (IMF, 2020). Moreover, following the development and distribution of COVID-19
vaccines, with the expectations that vaccination would reach Africa in early or middle of
2021, this would guarantee that there is minimal disruption to markets activities. Therefore,
our present study analyse the recent improvement in Africa’s stock markets development
and its related factors, by considering resilience, which is defined as the stock markets’
capacity to withstand downturns caused by a global pandemic and other exogenous factors
and quick recoveries.
Thus, a stock market is deemed resilient if the market has the capacity to endure
unexpected enormous fluctuations and swiftly relapse to better or equal stages of operations
and competent pricing. Resilience is a central subject irrespective of the path of the shock –
whether it is an enormous boom or downturn, the challenges are the same for an efficient
market (Thomas, 2006). In the absence of resilience in a stock market, an adverse shock in
prices will affect the operation and liquidity of the market unfavourably. In an extreme case,
the nonexistence of resilience causes market institutions to crash when there is a massive
shock in price and a total halt in trading activities[1] (Thomas, 2006); resulting from a global
pandemic (e.g. COVID-19). The importance of resilience can be viewed from two broad
points: analytically it is an essential and requisite efficient condition in markets. When a
market is regarded to be efficient, prices swiftly return to equilibrium, irrespective of the
source of the fluctuation – be it from news media or from order flow. On the other hand, and
more practically, the lack of resilience commonly leads to risk in liquidity (Thomas, 2006).
Several studies have been carried out in relation to the effect of different catastrophes –
natural or man-made (including earth quakes, hurricanes, terrorism, wildfires, tsunami,
disease pandemic, etc.), on stock markets returns in diverse parts of the globe. Most of these
studies focused on natural disasters and financial markets and mostly event or case studies
and on specific industries such as real estate, insurance and construction (Tao, 2014; Yang
et al., 2008; Worthington and Valadkhani, 2004). Others examined “contagion” impacts in
international capital markets, including the crash of the Mexican peso in 1994, the 1997–
1998 crisis in East-Asia and the 1998 crisis in Russia (Ahlgren and Antell, 2010; Rodriguez,
2007; Forbes, 2004, 2002; Forbes and Rigobon, 2002). Further, some studies analysed the
contagion impact across global markets for immediate and prolonged periods after the
disaster, for example, between one and three months following the Tsunami in South-East Stock market
Asia in December 2004 (Lee et al., 2007) and how the largest 24 earthquakes impacted stock in Sub-
market indices in 35 financial markets (Ferreira and Karali, 2015). However, to the
awareness of the authors, studies have not analysed the resilience of stock markets to
Saharan Africa
external shocks from commodity markets and exchange rate markets as a result of a global
pandemic (COVID-19). Following the observations abovementioned, we raised some
fundamental research queries – what is the duration for the stock market to revert to the
status quo following an event? For what duration does the market remain susceptible to
shocks? Does the COVID-19 outbreak result in an adverse effect on stock markets in Africa?
This study, therefore, is set out to answer these research queries.
Recently, numerous scholars have investigated the impact of the Coronavirus health
crisis by focusing on the nature of the returns on the stock market during or after a
catastrophe in certain economies (Al-Awadhi et al., 2020; Jelilov et al., 2020; Zhang et al.,
2020; Rababah et al., 2020). However, divergent from prior empirical studies on the effects of
Coronavirus on financial markets, we investigate the resilience of the African stock markets
amidst a global pandemic, using data from 12 stock exchanges. Therefore, our study
examines the global effects of health shock – COVID-19 and other external (commodities)
shock on Africa’s financial markets. Our study is unique in the following ways: one, we use
the recent panel vector autoregressive (VAR) methodology, which enables us to capture
stock markets’ response to the COVID-19 outbreak and other exogenous and external
shocks. The model provides the causal relationship between variables, their responses to
contemporaneous innovations and the contributions of the endogenous variables to
variations in other variables. It also shows us the duration of a shock and how long it takes a
variable to return to equilibrium. Two, unlike previous studies that relied only on the
influence of Coronavirus on stock returns or response of stock markets to Coronavirus
related cases and deaths, in addition to the global COVID-19 cases and deaths, our study
also examines how stock markets in Africa react to shocks in other commodity markets,
such as gold and crude oil markets and the foreign exchange rate markets, proxied by the
US dollars index futures.
Our motivation for the study on stock markets in Africa was based on numerous
motives. Notwithstanding the recent increased interest by researchers and policymakers on
the issues related to stock markets and Coronavirus (Ashraf, 2020; Narayan, 2020a, 2020b;
Devpura and Narayan, 2020; Iyke, 2020a, 2020b; Prabheesh et al., 2020; Salisu et al., 2020),
only a few studies have considered how COVID-19 impacted the financial markets in Africa
(Erdem, 2020; Topcu and Gulal, 2020; Elsayed and Elrhim, 2020; Takyi and Bentum-Ennin,
2020; Iyke and Ho, 2021). Stock markets in many African economies are comparatively
underdeveloped and are made up of a few large firms (Iyke and Ho, 2021). Despite the fact
that financial markets of many African countries are less developed in terms of market size
and capitalization, however, the South African stock market (Johannesburg Stock
Exchange) forms an outlier as the 19th largest stock exchange globally in 2013 [2].
Furthermore, stock markets in Africa do not have much connectivity with foreign stock
markets and could serve as a substitute for the diversification of financial risks by foreign
investors. As of June 2016, about one-half of the 54 economies in Africa have securities
exchanges and in the period between 2011 and 2015, the continent witnessed 441 equity
capital market dealings amassing the sum of US$41.3bn and about 28 listings. Within the
same period, firms in Africa made about 105 initial public offerings (IPOs) on African,
foreign exchanges and non-African firms in African exchanges, attracting around US$6.1bn
(Adoms et al., 2020; World Bank, 2020).
JFEP Furthermore, in terms of foreign participation, foreign direct investment (FDI) inflows
into Africa have been declining since 2018, according to the UNCTAD World Investment
Report (UNCTAD World Investment Report, 2019; 2020, 2021a, 2021b). Specifically, FDI
value declined from US$50.2bn in 2018 to US$45.4bn in 2019, which is a roughly 10.3%
drop. In addition, as a result of COVID-19’s enduring and multifarious negative influence on
regional and global cross-border investments, FDI into the continent further dropped by
roughly 15.6% to US$39.8bn in 2020. On the sub-regional levels, North Africa (NA) also
experienced a decline of about 11% to US$14bn in 2019, while the Egyptian economy – the
largest beneficiary of FDI – had a rise of about US$9bn. The NA’s FDI further decline by
25% to US$10bn in 2020. Sub-Saharan Africa saw a decrease of 10% from 2018 to 2019 to
the sum of around US$32bn. This declined further by around 12% to US$30bn in 2020.
While Southern Africa, on the other hand, experienced a rise of 22% in 2019 to about $4.4bn,
FDI decreased by around 16% to US$4.3bn in 2020. The South African economy
experienced a decline in FDI inflow by 15% to about US$4.6bn in 2019. Similarly, FDI
inflows dropped by 21% to US$11bn in 2019 in West Africa, mainly due to the poor
performance of the oil and gas sector in resources-dependent economies like Nigeria.
Likewise, East Africa experienced a decline in FDI inflows by 9% to US$7.8bn (with a
further decline by about 16% to US$6.5bn in 2020). This was largely caused by the fall in
FDI flows in Ethiopia, by 25% to US$2.5bn due to political tensions; and in Kenya, by 18%
to US$1.3bn. Central Africa also had a decrease in FDI inflows by 7% to around US$8.7bn in
2019 (but this increased to US$9.2bn in 2020). The Democratic Republic of Congo in
particular had a fall of about 9% to US$1.5bn in 2019. In terms of FDI stock, the top investor
economies in 2019 include the Netherlands ($67bn), UK ($66bn), France ($65bn), China
($44bn), USA ($43bn), Mauritius ($37bn), South Africa ($33bn), Italy ($31bn), Singapore
($20bn) and Switzerland ($15bn) (UNCTAD, World Investment Report, 2019, 2020; 2021a,
2021b)[3]. Against this backdrop, it has become important for us in this study to form an
understanding of how stock markets in Africa are resilient to the ongoing global COVID-19
pandemic and other exogenous shocks. Following the introduction, theoretical and empirical
literature reviews are presented in Section 2. The third part deals with the data and
methodology used in Section 3. Descriptive statistics, results and discussion are displayed in
Section 4, whereas Section 5 provides the concluding remarks.

2. Theoretical and empirical literature

2.1 Health shocks, economic activity and stock markets
One may ask, “should a disease outbreak influence economic activities and stock markets”?
According to Evangelos (2021), the response is “yes”. Global contagious diseases such as
Coronavirus have widespread overwhelming effects on a great magnitude of the general
public. A sizeable number of the population become ill, causing an increase in the death toll
and more pressure on the health-care system, which battles to contain the rise in
hospitalization and the need to build isolation centres[4]. However, to protect citizens and
control the widespread of the virus, several policies are used including physical/social
distancing and restriction of movements, which leads to the slowdown of economic activities
(Almond and Mazumder, 2005; Garrett, 2008; Keogh-Brown et al., 2010). Consequently,
business operations are shut down, leading to a reduction in production, causing a rise in the
rate of unemployment and a reduction in consumption because of a fall in individuals’
revenues (Evangelos, 2021). This leads to a reduction in companies’ profits, a downward
revision of growth expectations, etc.
In addition, according to the behavioural finance theoretical explanation, health shocks
has the capacity to turn to economic and financial shocks due to the fact that there is a rise in
investors’ risk aversion when an economic catastrophe occurs as documented in Stock market
Malmendier and Nagel (2011), Cohn et al. (2015) or when there is risk in health shock, Decker in Sub-
and Schmitz (2016) and when there is a rise in health risk due to impending epidemic,
Evangelos (2021). Hence, Coronavirus-induced health shock is expected to cause a rise in
Saharan Africa
risk aversion, leading to an economic crisis occasioned by the COVID-19, which further
increase risk aversion, thereby causing financial tumult in the stock markets. Empirically,
the suggestion on the inverse link between stock market performance and Coronavirus
through financial theories was confirmed in Alber (2020), Al-Awadhi et al. (2020); Ashraf
(2020), etc.

2.2 Empirical review of literature

Herein this subsection we develop a literature review of the important associated studies to
the stock market’s resilience and major events, including COVID-19. Several foremost
happenings impact the stock market performance. Thus, conceptually, the current COVID-
19 disease is being viewed as a case of all-encompassing unprecedented incidents (Baker
et al., 2020), including man-made and natural catastrophes such as Ebola outbreak (Ichev
and Marin
c, 2018; Donadelli et al., 2017), large-scale events such as terrorist attack and air
travel mishaps (Cam and Ramiah, 2014; Barrett et al., 1987) or earthquakes and hurricanes
(Lee et al., 2018; Shelor et al., 1992).
In line with the efficient market hypothesis, prices of stock ordinarily alter
instantaneously devoid of some extreme response, with the outbreak of news to the general
public (Ding et al., 2020). In reality, most market participants behave irrationally. As
documented in Nofsinger (2003), behavioural finance indicates the overreaction of investors
in extreme pessimistic situations during the financial crisis or put excess relevance on
current happenings to the neglect of past data; resulting in a precipitous collapse in share
prices on negative information. Extant scholarly research studies established numerous key
unprecedented incidents that the stock market responds to, for instance, terrorist attacks
and earthquakes (Lee et al., 2018; Cam and Ramiah, 2014; Karolyi and Martell, 2010; Chen
and Siems, 2004; Shelor et al., 1992; Barrett et al., 1987). They document the extreme
responses of stock prices, which confirmed the usual biasedness from the literature of
behavioural finance. Such responses by investors are reasonable following the enormous
losses and the ensuing media attentions given to these types of events. Others examined the
impact of Ebola and other dangerous infectious diseases (Donadelli et al., 2017; Ichev and
Marin
c, 2018). For instance, Donadelli et al. (2017) find that disease-related news (DRNs)
significantly influences investors’ sentiments on Wall Street and argued that DRNs (i.e.
WHO alerts and media news) should not prompt rational trading. Ichev and Marin
c (2018)
find that the outbreak of Ebola has the strongest effect on firms whose stocks were more
exposed to the USA and the West African countries (WAC), suggesting that the news about
the outbreak of Ebola events was more important for firms that are located nearer to where
the outbreak originated and to the related stock markets.
Further, very few scholars attempted to investigate the resilience of stock markets
during economic turmoil caused by calamities, disasters or disease outbreaks using different
methodologies with mixed results (Ferreira and Karali, 2015; Chakraborty, 2012;
Worthington and Valadkhani, 2004). Ferreira and Karali (2015) examined the effect of large-
scale earthquakes on the aggregate returns and instability of financial markets in 35 capital
markets using event study methodology. They find the resilience of global capital markets
to earthquake driven shocks, for both global and domestic earthquakes. Also, with the
exception of Japan, earthquakes do not affect stock market volatility. Chakraborty (2012)
investigate the resilience of equity and derivatives markets in India using the value-at-risk
JFEP (VaR) approach. They find higher losses in the futures market compared to their
corresponding primary spot markets, thereby concluding that the equity market shows
more resilience than the derivative market. On the other hand, Worthington and Valadkhani
(2004) examined whether natural disasters affect the equity market in Australia using
autoregressive moving average models with intervention analysis. They find major effects
arising from earthquakes, cyclones and bushfires to stock market returns, while severe
floods and storms were found to have no impact. They also document either positive and/or
negative net effects occurring immediately after the event and adjusting in the following
days. Thomas (2006) examined the resilience of liquidity of securities markets in India and
find that bond market liquidity is less resilient in the face of negative price shocks than
equity market liquidity. Tripathi (2016) matched stock markets in the course of diverse
large-scale catastrophes in the history of the USA. They find that major disasters impact the
stock markets; however, resiliency was confirmed at variant levels.
Akin to other varieties of catastrophes and large events, the Coronavirus is an
unanticipated massive event that has impacted the world economy and overwhelmingly
destroyed international financial markets after it was declared a global pandemic (Ding
et al., 2020). The speedy transmission of the disease and the rapid rise in the level of deaths
has resulted in both social and economic effects and are generally regarded as economy-
wide shocks, thereby altering the attitude of investors on the macro- and micro-economic
atmosphere of capital markets.
Formerly, widespread illnesses, for instance, SARS – Severe Acute Respiratory
Syndrome, Ebola and Influenza have impacted several economies globally, leading to large-
scale economic downturns, loss of property and human lives. For instance, the occurrence of
Influenza caused around a 5% reduction in the US’s gross domestic product (GDP) (Palese,
2004). Further, over 11,300 fatalities were recorded globally and the US recorded about US
$53bn in deficit following the outbreak of Ebola (Hai et al., 2004). Also, over 8,000 persons
were affected by SARS, which lead to the Chinese GDP falling by 1% and estimated damage
to the global economy to around US$54bn (Ding et al., 2020). Nonetheless, the current
Coronavirus health crisis is incomparable to any of the aforementioned epidemics following
the destructions caused to the global markets and the number of persons affected (Baker
et al., 2020; Ding et al., 2020). As of February 2021, over 3 million people were infected by the
Coronavirus and a total of over 100,000 deaths were recorded in Africa and the figure is still
on the rise (Africa CDC, 2020).
Following the Coronavirus outbreak, several studies have investigated its effects on the
general economy and particularly stock markets; e.g. Ashraf (2020), Al-Awadhi et al. (2020),
Kumeka et al. (2021), Raifu et al. (2021), etc. In a study on China, Al-Awadhi et al. (2020)
examined the contagious nature of Coronavirus and the sectoral stock market outcomes. A
panel data approach was adopted with companies’ data ranging from 10 January to 16
March 2020 on the stock market and data on Coronavirus was obtained from Worldometer,
which consisted of number of active daily reported infections and daily fatality cases. They
found that the daily reported cases and growth of Coronavirus had a significant adverse
influence on the Chinese stock market returns. Similarly, Ashraf (2020) analysed how
Coronavirus affected stock markets in 64 markets for the period between 22/01/2020 and 17/
04/2020; and found that Coronavirus reported cases had a negative influence on stock
market returns. Though, the negative response of the financial market is more significant
for the reported cases than for the growth in fatalities. It was further argued that in the early
period of the reported cases, the inverse market response was stronger than around 40 and
60 days following the first reported case. Generally, it was concluded that stock markets
responded instantly to Coronavirus disease; however, the reaction fluctuated over time
conditional on the stage of the epidemic. Another panel study was conducted by He et al. Stock market
(2020) on Japan, Spain, China, Germany, France, South Korea, Italy and the US to in Sub-
empirically analyse the direct and spillover effects of Coronavirus on financial markets and
document the short-run adverse impact of the disease outbreak on the concerned economies
Saharan Africa
and the effect has bi-directional contagious impact among Asian economies and, American
and European economies.
Also, Baker et al. (2020) examined the extraordinary response of the US financial market
to Coronavirus from 2 January 1900 to 24 March 2020. They discovered that no prior
epidemic of infectious disease, with the Spanish Flu, has strongly influenced the financial
market as the current Coronavirus health crisis. They, therefore, argued that the possible
explanation for the unmatched impact the stock market experienced is as a result of the
course of action taken by various authorities towards containing the Coronavirus pandemic.
In another study in the US, Onali (2020) examined how Coronavirus cases and fatalities
affect the stock market – proxied by S&P 500 and the Dow Jones indices and their volatility.
Using daily data for one year from 8 April 2019 to 9 April 2020, the study adopted three
models – GARCH(1, 1), standard VAR and structural breaks Markov-switching models.
From the GARCH model, they found that the US stock market returns were not impacted by
movements in the number of cases and fatalities in the US and other nations (Spain, Italy,
China, the UK, France and Iran) highly ravaged by Coronavirus cases in the first three
months of 2020, except for the log of a number of documented cases in China. By extension,
the VAR model revealed that reported Coronavirus cases in France and Italy are positively
related to the volatility index but inversely related to the Dow Jones returns. Further,
Ramelli and Wagner (2020) examined the feverish responses of the financial market to the
Coronavirus health crisis in the US from 31 December 2018 to 3 April 2020. They opined that
the Coronavirus pandemic signifies an alarming and unparalleled challenge for both
policymakers and financiers and as the virus spread, investors reacted by evaluating the
economic costs. Generally, they found that from the viewpoint of actors in the stock market,
the Coronavirus health challenge transformed into a wider financial and economic challenge.
Furthermore, Ru et al. (2020) similar to the work of Baker et al. (2020), studied the
reactions of the global financial markets to the outbreak of the SARS virus in 2003 and the
current 2019 Coronavirus outbreak. Their finding suggested that economies that had
experienced SARS disease (SARS-CoV-1) in 2003 responded more swiftly to the initial case
of the Coronavirus (SARS-CoV-2) in late January 2020. Most countries that did not
experience SARS in 2003 showed weaker responses to the outbreak of COVID-19 until the
disease started spreading to other countries, such as Italy, South Korea in late February and
their stock markets started to topple. They, therefore, reported inappropriate responses to
the novel Coronavirus in economies where similar crises had not been experienced. In a
study by Alber (2020), the impact of Coronavirus spread on stock markets of the 6 worst-hit
economies was examined. These countries included China, Germany, Spain, France, Italy
and the USA and the Coronavirus spread was determined by new cases, aggregate cases,
new deaths and aggregate deaths between 1 March 2020 and 10 April 2020. Returns on the
stock market were computed by the change in each markets stock index while the COVID-19
spread was determined by the number of infections per million population. Their results
showed that stock market returns responded more to the reported cases of COVID-19 than
deaths and to aggregate COVID-19 measures more than new ones. They further document
the adverse influence of COVID-19 on the returns on the stock market for Spain, Germany,
China and France, while this effect could not be ascertained in the case of the US and Italy.
Following the study of Alber (2020), Elsayed and Elrhim (2020) analysed the impact of
Coronavirus spread on the different sectors on the Egyptian Exchange for the period 1
JFEP March 2020 through 10 May 2020. After using daily reported cases and deaths from COVID-
19 and daily sectoral stock returns from the Egyptian Exchange, they documented that the
sectors responded more to an aggregate number of deaths than daily death from COVID-19,
but they are more sensitive to new confirmed cases than to cumulative cases of the virus.
Further, Iyke and Ho (2021) analysed the economic consequences of escalating international
financier anxiety linked to the Coronavirus outbreak for 14 stock markets in Africa. By
using daily indices for investor anxiety derived from worldwide Google exploration
questions on COVID-19; they found that a rise in investor attention constantly causes a
reduction in stock market performances in Nigeria, Zambia and Botswana, whereas it
enhanced the markets in Tanzania and Ghana. Implying that in periods of uncertainty such
as the ongoing COVID-19 outbreak, stock markets such as those of Ghana and Tanzania
provide prospective benefits for investors to diversify. In another study on trade war, Akdag
et al. (2021) investigated the spillover implications of the US-China trade hostilities on the
economies of Brazil, India, Indonesia, South Africa and Turkey. By autoregressive
distributed lags, fully modified ordinary least squares and dynamic ordinary least squares
Granger causality from March 2003 to July 2019 period, they concluded that the trade
hostilities between the USA and China affected the stock market indexes of the sampled
economies [5].
Therefore, our contribution to the current empirical literature is to scrutinize the
resilience of financial markets in Africa to COVID-19 and other exogenous shocks. Extant
studies on the growing literature either considered the effect of Coronavirus on oil markets
(Iyke, 2020a, 2020b; Narayan, 2020a, 2020b; Devpura and Narayan, 2020; Salisu et al., 2020;
Prabheesh et al., 2020), exchange rates (Iyke, 2020a, 2020b; Narayan, 2020a, 2020b) or stock
markets (Takyi and Bentum-Ennin, 2020; Topcu and Gulal, 2020; He et al., 2020; Kumeka
et al., 2021; Raifu et al., 2021) and the effects of Coronavirus-related investor attention on
stock markets (Iyke and Ho, 2021). To the degree of our awareness, studies have not shown
the resilience of stock markets to health shocks (Coronavirus outbreak). Hence, our
contribution to the empirical literature is on health shocks and stock markets resilience.
Generally, studies in this area have focused on Ebola (Donadelli et al., 2017; Ichev and
Marin
c, 2018), earthquakes (Ferreira and Karali, 2015), hurricanes (Worthington and
Valadkhani, 2004; Tripathi, 2016). Our focus is on stock markets’ resilience to global health
shocks.

3. Data and methodology

3.1 Data
Our goal in this study is to analyse the resilience of stock markets amid the global health
and economic crisis of a group of African economies. To achieve this goal, data between 02/
01/2020 and 31/12/2020 was used on a daily basis for a group of 12 economies: Ivory Coast,
Botswana, Kenya, Egypt, Mauritius, Namibia, Morocco, Nigeria, Tanzania, South Africa,
Uganda and Zambia. Our sample is restricted to only 12 African markets due to the
constraints in data availability. All stock markets indices, commodity markets – gold and
crude oil prices and exchange rate series are sourced from www.investing.com, while
COVID-19 data is obtained from www.ourworldindata.com. External shocks will be
measured by the global non-stock markets from two commodities (i.e. crude oil and gold)
and the US dollar index futures (DX). We transform all of the series to their returns forms by
taking their first log differences. Further, we observed some data are missing since there are
unique state gazetted holidays among the selected economies. Missing data creates an
unequal frequency problem in the data set. Hence, following Sugimoto et al. (2014), we
substitute the previous day’s data for all omitted data points, rather than just implementing
imbalanced data and leaving out useful facts by removing relevant data points. Complete Stock market
detail of the series, including sources, measurements and symbols is displayed in Table 1, in Sub-
the panel summary statistics are provided in Table 2, while country-wise summary
Saharan Africa
statistics are displayed in Table A1 in the Appendix.

3.2 Methodology
3.2.1 Panel vector autoregression. To accomplish the purposes of this study, which is to
scrutinize the resilience of African stock markets amid commodity markets shocks, foreign
exchange market shocks and COVID-19 health shocks, we used the panel vector
autoregressive (pVAR) model. This was necessitated given the existence of endogenous
series in our model (Santiago et al., 2019). The study by Holtz-Eakin et al. (1988) was the
pioneer developer of this model following the time-series VAR developed by Sim (1980). The
pVAR model is rich with three important structures that place it in an apex position for our
analysis (Canova and Ciccarelli, 2013). One, the pVAR system is endogenously constructed
in such a way that all series are treated in an unrestricted manner, making it more applicable
in situations where the series have robust correlations and there is the interaction among
variables. In estimations involving stock market performance, commodity markets and
exchange rates, such is highly probable and empirical studies have previously presented the
presence of causality running from both directions among whichever two of the three series

S/N Symbols Variables Measurements Source

1 smr Stock market index of Returns on the stock market index www.investing.com
the individual
countries1
2 usdir Exchange rates US dollar index futures (DX) www.investing.com
3 oilbr Brent crude oil price Brent oil futures (BF1) www.investing.com
4 goldr Gold price Gold futures (ZGZ0) www.investing.com
5 gc Global COVID-19 Growth in daily COVID-19 cases www.ourworldindata.com
cases
6 gd Global COVID-19 Growth in daily COVID-19 deaths www.ourworldindata.com
deaths

Notes: 112 stock markets in Africa including Botswana, Ivory Coast, Egypt, Kenya, Mauritius, Morocco, Table 1.
Namibia, Nigeria, South Africa, Tanzania, Uganda and Zambia Characteristics of
Source: Compiled by the authors data

Variables Obs Mean Std dev. Min Max

smr 2,316
0.001 0.015
0.099 0.108

gc 2,316 0.053 0.226
0.442 8.000
gd 2,316 0.033 0.118
0.022 2.000
goldr 2,316 0.001 0.014
0.047 0.058
oilbr 2,316
0.001 0.048
0.244 0.210
usdir 2,316
0.0001 0.005
0.015 0.020

Note: see Table 1 for variables definition Table 2.

Source: Authors’ computation Summary statistics
JFEP (Ouyang and Li, 2018). Next, in relation to the time-series approach, the pVAR technique
also accounts for cross-sectional dynamic heterogeneity, which provides added explanations
on the basis of heterogeneity. This is relevant in our current study because of the presence of
unequal levels of stock markets development in Africa. For this reason, the pVAR model
offers us a superior approach to isolating the dynamic heterogeneity within the African
region. Finally, the pVAR has the capacity to simply capture the variation in time in the
estimates and innovations in the variance. Given this context, an estimator that enables
stationary dependent series to be present and individual heterogeneity to be unobserved
was suggested by Love and Zicchino (2006). Specification of the model used in this study
follows the equation, thus:

Zit ¼ T0 þ T1 Zit
1 þ fi þ dc;t þ « t ð1Þ

from equation (1), Zit stands for the vector of the series in our investigation (that is, returns on
the stock market, growth in globally reported cases of COVID-19, growth in global COVID-
19 deaths, gold price returns, Brent oil returns and exchange rate returns), T0 represents the
vector of intercepts, T1 Zit
1 represents the polynomial matrix, fi and dc;t stand, respectively,
for the fixed and time-fixed effects, while « t denotes
 the idiosyncratic errors term by means

0  P 0
of E ð« jt Þ ¼ 0; E « it « it ¼ ; and E « it « ij ¼ 0given that every t > j.
The benefit of the pVAR model is that it allows for the direct addition of fixed effects,
represented by fi that captures a country’s unobservable time-invariant factors. In the case
of our study, the presence of fixed effects becomes necessary, as it affords individual
markets with specific country level for every factor and further captures additional factors
that do not vary with time, including the size of a country, diverse exchange rate policies
and stock market regulations. Nevertheless, certain estimation problems arise from the
existence of fixed effects in models including lags of the endogenous series. There is always
a connection between the independent variables and the fixed effects, thus, the conventional
mean-differencing method used to remove fixed effects would generate spurious
coefficients. As a result, Arellano and Bover (1995) suggested the implementation of the
forward mean-differencing, which also preserves the orthogonality between altered and
lagged explanatory variables. Also, we use the previous values of the regressors as
instruments and where a system generalized method of moments is used to estimate the
coefficients.
An added advantage of using the panel approach lies in the allowance for joint time
effect, indicated by dc;t included in equation (1) to account for any overall macroeconomic
innovations that are likely to influence these sampled economies in a similar fashion. For
instance, time effects account for common factors including crude oil prices, spreads or
international risk factors. For the purposes of this study, we use the forecast error variance
decomposition (FEVD)-factor error variance decomposition and the IRFs-impulse response
functions that emphasize how one variable contributes to the variation in another variable
and the reaction of a variable to the impulses in other series in the pVAR system, whereas
other fluctuations are being held constant. To achieve this task, it is recommended to define
a systematic variables ordering (Hamilton, 1994). Basically, the recommended rule is to
arrange the variables in such a way that the more exogenous ones come first followed by the
more endogenous series, which come last in the system (Love and Zicchino, 2006). Therefore,
we assume that international commodity markets, US dollar index futures and global
COVID-19 pandemic are more exogenous when compared to domestic stock markets. As
evident in the finance literature, as a result of the financialization of commodity markets,
traders in the commodity market, mostly oil market monitor simultaneously the movement
in commodity and stock markets because the stock market creates a substitution Stock market
opportunity between stock and commodity markets (Kumar, 2019; Jain and Biswal, 2016). In in Sub-
addition, it is suggested that a rise in the prices of oil will bring about a fall in exchange Saharan Africa
rates, which further causes inflation to rise, thus influencing stock prices negatively.
Moreover, our hypothesis is that innovations in commodity markets and exchange rates
create a contemporaneous impact on stock markets, whereas the innovations in stock
markets influence the commodity markets and exchange rates with lags, which means that
commodity markets and exchange rates come before the stock market in our model. Hence,
our model follows the following ordering of variables – gold market, crude oil market,
exchange rate market, COVID-19 and stock markets.

3.2.2 Holtz-Eakin, Newey and Rosen’s (1988) method of granger causality investigation.
n time-series data analysis, the conventional test for causality (Granger, 1981) is basically
used to ascertain the causal relationship between variables (Pradhan et al., 2013). However,
in the case of panel data study, a more superior technique was advanced by Holtz-Eakin
et al. (1988). Using two models (model 1 for COVID-19 cases and model 2 for COVID-19
deaths), the models for the Granger causality analysis for this study are specified, thus:
Model 1: With COVID-19 cases

X
p X
q X
r
Dsmrit ¼ s 1j þ x 1ik Dsmrit
k þ d 1ik Dgcit
k þ f 1ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 1ik Doilbrit
k þ g 1ik Dgoldrit
k þ j 1it (2)
k¼1 k¼1

X
p X
q X
r
Dgcit ¼ s 2j þ x 2ik Dsmrit
k þ d 2ik Dgcit
k þ f 2ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 2ik Doilbrit
k þ g 2ik Dgoldrit
k þ j 2it (3)
k¼1 k¼1

X
p X
q X
r
Dusdirit ¼ s 3j þ x 3ik Dsmrit
k þ d 3ik Dgcit
k þ f 3ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 3ik Doilbrit
k þ g 3ik Dgoldrit
k þ j 3it (4)
k¼1 k¼1

X
p X
q X
r
Doilbrit ¼ s 4j þ x 4ik Dsmrit
k þ d 4ik Dgcit
k þ f 4ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 4ik Doilbrit
k þ g 4ik Dgoldrit
k þ j 4it (5)
k¼1 k¼1
JFEP X
p X
q X
r
Dgoldrit ¼ s 5j þ x 5ik Dsmrit
k þ d 5ik Dgcit
k þ f 5ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 5ik Doilbrit
k þ g 5ik Dgoldrit
k þ j 5it (6)
k¼1 k¼1

Model 2: With COVID-19 deaths

X
p X
q X
r
Dsmrit ¼ s 1j þ x 1ik Dsmrit
k þ d 1ik Dgdit
k þ f 1ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 1ik Doilbrit
k þ g 1ik Dgoldrit
k þ j 1it (7)
k¼1 k¼1

X
p X
q X
r
Dgdit ¼ s 2j þ x 2ik Dsmrit
k þ d 2ik Dgdit
k þ f 2ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 2ik Doilbrit
k þ g 2ik Dgoldrit
k þ j 2it (8)
k¼1 k¼1

X
p X
q X
r
Dusdirit ¼ s 3j þ x 3ik Dsmrit
k þ d 3ik Dgdit
k þ f 3ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 3ik Doilbrit
k þ g 3ik Dgoldrit
k þ j 3it (9)
k¼1 k¼1

X
p X
q X
r
Doilbrit ¼ s 4j þ x 4ik Dsmrit
k þ d 4ik Dgdit
k þ f 4ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 4ik Doilbrit
k þ g 4ik Dgoldrit
k þ j 4it (10)
k¼1 k¼1

X
p X
q X
r
Dgoldrit ¼ s 5j þ x 5ik Dsmrit
k þ d 5ik Dgcit
k þ f 5ik Dusdirit
k
k¼1 k¼1 k¼1

X
s X
l
þ w 5ik Doilbrit
k þ g 5ik Dgoldrit
k þ j 5it (11)
k¼1 k¼1

See Table 1 for a detailed definition and description of variables. The lag lengths for the
variables in equations (2)–(11) are defined by p; q; r; s and l, which can be established
following the Engle-Granger approach (Engle and Granger, 1987).
4. Results and discussion Stock market
4.1 Summary statistics in Sub-
Panel data descriptive statistics of the variables are shown in Table 2. To appreciate
the features of the variables, we evaluated the cross-sections, existence of cross-
Saharan Africa
sectional dependence (CD), summary statistics and the level of stationarity of the
series used. As revealed in Table 2, the stock returns under the period of analysis for
these group of African economies, have an average value of
0.001 with a value of
0.015 level of variation, a minimum and maximum returns of
0.099 and 0.108,
respectively. Similarly, returns on Brent crude and US dollar index futures have
negative returns within this period at
0.001 and
0.0001, respectively, with a
standard deviation of 0.048 and 0.005 and minimum values of
0.244 and
0.015 and
maximum returns of 0.210 and 0.020, respectively. Conversely, returns on gold prices
are positive at 0.001 during this period, with a value of 0.014 level of variation,
minimum and maximum values, respectively, of
0.047 and 0.058. These results
indicate that while the stock, crude oil and the exchange rates markets deteriorated
during the COVID-19 pandemic, on average, gold commodity prices recorded some
improvements. As the pandemic persisted, the gold market was perceived as a safe
haven for most investors. Further, we presented the descriptive statistics for the
individual economies, displayed in the Appendix (Table A1). The results in Table A1
show that all stock markets recorded negative average returns in the period under
review, except for the South African market. Mauritius and Namibia reported the
highest daily returns (0.108 and 0.104, respectively), while Botswana reported the
lowest daily returns. On the flip side, the stock market in South Africa recorded
the largest daily losses, whereas Botswana has the least daily losses within the study
period. We also plot the daily stock market indices and their returns as displayed in
Figures A1 and A2 in the Appendix. Most stock markets in Africa crashed around
mid-March 2020, which was around the period the Coronavirus was confirmed as a
worldwide health disaster by World Health Organization (WHO), specifically on 11
March 2020.

4.2 Panel unit root tests

Different panel unit root tests were used for robustness, these include, Maddala and Wu
(1999), Harris and Tzavalis (1999), Breitung (2001), Levin et al. (2002), Im et al. (2002) unit
root tests. Further, following the empirical literature, we also conduct the Pesaran (CD) and
the cross-sectionally augmented IPS (CIPS) tests, developed by Pesaran (2004, 2007) to
evaluate whether there is any CD and to test the stationarity level of our variables. Table 3
reveals that all the series are of order zero, I(0), that is, level stationarity. Further, the results
of CD and CIPS tests are presented in Table 4. It should be noted that CIPS was not
performed for the gold price, Brent oil price and US dollar index futures series, as they are
identical across the panel.
It is evident that CD exists in all the series when we considered the logarithmic
returns for the stock, gold, crude oil prices and exchange rate, as shown by the Pesaran
CD test (Pesaran, 2004); meaning that there exists a correlation between our variables
across the sampled economies. This phenomenon occurs as a result of the joint shocks
that the cross-sections share and if overlooked, it can generate spurious and erroneous
results in the econometric method (Santiago et al., 2019; Eberhardt and Teal, 2011). As
we confirmed the existence of CD in all the series, the 2nd-generation unit root test was
also performed – the CIPS test. This became necessary given the fact that the panel unit
root tests for the 1st-generation are not consistent in the presence of such an event. As
 JFEP

Table 3.

root test results

Various panel unit
Test method smr goldr oilbr usdir gc gd

Null hypothesis: unit root with common process

Levin, Lin and Chu t*
22.324***a
25.186***a
26.418***a
20.921***a
40.143***a
26.588***a
Breitung l
25.859***a
19.247***a
30.862***a
20.299***a
11.569***a
28.518***a
Harris-Tzavalis r 0.197***a 0.012***a 0.158***a 0.254***a 0.064***a 0.134***a
Null hypothesis: unit root with the individual unit root process
Im, Pesaran and Shin z~t
bar
30.143***a
34.183***a
31.119***a
28.973***a
29.207***a
30.701***a
ADF Fisher x 2
12.369***a
23.321***a
15.146***a
20.188***a
15.500***a
11.854***a
No. of panels 12 12 12 12 12 12
No. of periods 193 193 193 193 193 193

Notes: a denote stationarity at level, while *** indicate statistical significance at 1%. Stock market, gold price, Brent crude oil, US dollar index are expressed in
natural logarithms, while COVID-19 indicators are in their growth rates. See Table 1 for variables definition
displayed in Table 4, it is observed that in both the returns and growth rates, the order Stock market
of integration is at level, i.e. I(0) with or without trend for all series. This confirmed the in Sub-
estimation of pVAR as the correct approach.
Next, to deal with the problem of collinearity and multicollinearity in the
Saharan Africa
estimation, we examined the VIF- variance inflation factor and the correlation
conditions of the variables. Table 5 presents the correlations between variables and
the estimations of the VIF. Generally, it is observed that multicollinearity does not
appear to be an issue of worry, as the correlation values, VIF and mean VIF values are
very small.
Furthermore, Table 6, Panel A and Panel B, presents the last pre-estimation test, which is
to ascertain the lag length selection criteria for pVAR estimation. For the purposes of
modelling and sensitivity analysis, we developed two models to capture the two COVID-19
proxies – one for the Coronavirus reported cases and the second for Coronavirus reported
deaths. As observed, both Panel A and Panel B show that the best lag order length is lower
for the modified Bayesian information criterion (MBIC) and modified Quinn information
criterion (MQIC) when we select the first lag, whereas it is lower for modified Akaike
information criterion (MAIC) when the second lag is chosen. Regarding the number of the
best lag length selected by the system, our choice of the measure was based on the MAIC
criterion according to Ng and Perron (2001) and we estimated our pVAR models using order
two.

Cross-sectional dependence (CD) CIPS (Zt-bar)

Variables CD test Corr Abs (corr) Without trend With trend

smr 6.02*** 0.053 0.115
16.303***
16.359***

gc 26.54*** 0.235 0.244
16.628***
16.664***
gd 5.99*** 0.053 0.101
16.936***
16.608*** Table 4.
goldr 112.86*** 1.000 1.000 Cross-sectional
oilbr 112.86*** 1.000 1.000 dependence test and
usdir 112.86*** 1.000 1.000 second-generation
Notes: 1. Note that the Pesaran CIPS test is not conducted for the gold price, Brent oil price and US dollar unit root test (cross-
index futures series, as they are considered to be homogenous and cross-section invariant. 2. *** denotes sectionally
significance at 1% and D is the first difference. See Table 1 for variables definition augmented IPS)

Variables smr gc gd goldr oilbr usdir

smr 1.000
gc 0.036 1.000
gd 0.003 0.084 1.000
goldr 0.007 0.030
0.001 1.000
oilbr 0.129 0.003
0.025
0.053 1.000
usdir
0.038 0.019 0.006
0.290 0.056 1.000 Table 5.
VIF 1.01 1.01 1.10 1.01 1.09
Correlation matrices
Mean VIF 1.04
and variance
Note: See Table 1 for variables definition inflation factor
Source: Authors’ computations statistics
JFEP 4.3 Panel vector autoregression regression results
For the purposes of sensitivity analysis, we present two models of analysis – model one
includes the growth in reported cases of Coronavirus, while the second model accounts for
the effects of the growth in the number of deaths occasioned by the Coronavirus. The two
models of analysis are presented in Table 7 for the pVAR estimates with two lags. Models
1 – 5 account for the effect of the growth in COVID-19 reported cases, while models 6 – 10
account for the effects of the growth in COVID-19 reported deaths. However, the examined
coefficients of the pVAR communicate not as much of a message to readers (Galariotis et al.,
2016), rather the curiosity of researchers is in the effect of independent shocks in every
dependent variable and on other series in the pVAR system, that is, the FEVD and the
related IRFs. The estimated pVAR using second-order lags and the option of gmmstyle
(Abrigo and Love, 2016; Santiago et al., 2019; Holtz-Eakin et al., 1988), which swaps omitted
values with zeroes and has the capacity of generating more reliable and consistent results.
The pVAR stability was further verified and validated for the two models, given that the
eigenvalues lie within the unit circle, which also signifies the stationarity of our series
(Babalos and Stavroyiannis, 2020; Santiago et al., 2019; Lütkepohl, 2005). Tables 8 and 9
exhibit the pVAR eigenvalue stability condition.

4.4 Granger causality test

Here, we conducted the panel causality test for Granger based on the Wald test following the
pVAR estimation of two lags and the verification of its stability (Abrigo and Love, 2016).
Table 10 displays the causality test results for the two models for COVID-19 cases and
deaths. Two hypotheses guide the pVAR Granger causality test, that is, no causality
relationship among the variables for the null hypothesis and there is a causality relationship
among the variables for the alternative hypothesis. It should be noted that our focus in the
study is to evaluate the resilience of African stock markets in the midst of a global pandemic
and external shocks. Hence, considering the results in Table 10, there is no evidence of a
causal relationship between the growth in the globally reported cases of Coronavirus and
the stock market returns in Africa. Specifically, our results show no effect from the global
Coronavirus confirmed cases on stock markets in Africa, both for the first and second lags.
Equally, we do not find evidence of any significant influence coming from growth in global
reported deaths of Coronavirus to the stock markets in Africa. These results are consistent
with recent studies that documented similar findings (Babarinde, 2020; Onali, 2020), who
found that the performance of stock markets in the US and other COVID-19 highly ravaged
economies were not impacted by movements in the number of cases and fatalities in the first

lag CD J J p value MBIC MAIC MQIC

Panel A: Model with COVID-19 cases

1 0.690 232.934 7.50E
19
323.386 88.934
61.500
2 0.765 141.206 2.16E
14
136.953 69.206
6.0103
3 0.418
Panel B: Model with COVID-19 deaths
1 0.211 191.851 1.73E
18
194.482 91.851
12.617
2 0.257 108.259 2.46E
12
84.9073 58.259 6.025
Table 6. 3 0.341
Criteria choice for lag
length Source: Authors’ compilation
 (1) (2) (3) (4) (5) (6)
Variables smr goldr oilbr usdir gc smr

Smr L1 0.0701 (0.0540) 0.0234 (0.0284) 0.2078** (0.1015)
0.0236** (0.0106) 0.1773 (0.1390)

L2 0.0279 (0.0567) 0.0802*** (0.0289) 0.2883** (0.1122)
0.0063 (0.0105) 0.1299 (0.1994)

goldr L1
0.0674** (0.0303)
0.0375 (0.0251)
0.3115*** (0.0825)
0.0119 (0.0094) 0.6467 (0.4882)

L2
0.0108 (0.0293)
0.0071 (0.0279) 0.0066 (0.0855) 0.0245*** (0.0088)
0.2239 (0.2854)

oilbr L1 0.0209** (0.0100) 0.0050 (0.0073) 0.1313*** (0.0398)
0.0223*** (0.0031)
0.0117 (0.0512)

L2 0.0088 (0.0098)
0.0235*** (0.0081) 0.0175 (0.0246)
0.0030 (0.0021)
0.0395 (0.0333)

usdir L1
0.1119 (0.0939)
0.5751*** (0.0841) 0.7532** (0.2966) 0.2249*** (0.0289) 0.8305* (0.4470)

L2
0.3187*** (0.1102)
0.1423 (0.0881) 0.4103* (0.2364) 0.1455*** (0.0272) 1.5801* (0.8187)

gc L1 0.0003 (0.0008) 0.0007 (0.0008)
0.0039* (0.0021) 0.0007*** (0.0002) 0.0597 (0.0370)

L2 0.0001 (0.0009) 0.0005 (0.0006)
0.0086*** (0.0024) 0.0002 (0.0002) 0.1362*** (0.0433)

gd L1
0.0012 (0.0016)

L2 0.0011 (0.0018)

Observations 2,280 2,280 2,280 2,280 2,280 2,280

Notes: L1 and L2 denote lag 1 and lag 2, respectively. Standard errors are presented in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1. See Table 1 for variables
definition
(continued)

regression results
Panel VAR
Table 7.
Saharan Africa
Stock market
in Sub-
 JFEP

Table 7.
(7) (8) (9) (10)
Variables goldr oilbr usdir gd

Smr L1 0.0262 (0.0937)

L2
0.2104 (0.1321)

goldr L1 0.2372* (0.1288)

L2 0.3097** (0.1379)

oilbr L1 0.0075 (0.0330)

L2
0.0151 (0.0301)

usdir L1 0.2299 (0.3987)

L2 0.1853 (0.3795)

gc L1

L2

gd L1 0.0024 (0.0017)
0.0157*** (0.0052) 0.0009 (0.0006) 0.1497*** (0.0424)

L2
0.0009 (0.0018)
0.0040 (0.0056) 0.0009 (0.0007) 0.0434* (0.0222)

Observations 2,280 2,280 2,280 2,280

 Eigenvalue Graph Stock market
Real Imaginary Modulus
Roots of the companion matrix
in Sub-
0.469138 0 0.469138 1 Saharan Africa
0.372518 0.110954 0.38869
0.372518 -0.11095 0.38869 5
.
0.337657 0 0.337657
y
0.284046 -0.12609 0.310773 ra
n
i 0
g
a
0.284046 0.126087 0.310773 m
I
0.274347 0 0.274347 5
-.
0.045073 -0.26315 0.266987
0.045073 0.263154 0.266987
1
-
Table 8.
0.224476 0 0.224476 -1 -.5 0
Real
.5 1
Eigenvalue stability
condition for the
Note: All the eigenvalues lie inside the unit circle. pVAR satisfies stability condition. COVID-19 cases
Source: authors’ computation

Eigenvalue Graph
Real Imaginary Modulus
Roots of the companion matrix
0.423471 -0.10105 0.43536 1
0.423471 0.101046 0.43536
0.306665 0 0.306665 5
.
0.276422 0.119881 0.301298
y
0.276422 -0.11988 0.301298 ra
n
i 0
g
a
0.049687 -0.24107 0.246139 m
I
0.049687 0.241072 0.246139
5
-.
0.231295 0 0.231295
0.178336 0 0.178336
1
-
Table 9.
0.108029 0 0.108029 -1 -.5 0 .5 1
Real Eigenvalue stability
condition for COVID-
Note: All the eigenvalues lie inside the unit circle. pVAR satisfies stability condition. 19 deaths
Source: authors’ computation

Variables smr goldr oilbr usdir gc gd

smr does not cause – 7.992** 11.715*** 5.352* 1.634 2.553

goldr does not cause 5.029* – 15.566*** 12.099*** 1.878 5.615*
oilbr does not cause 6.431** 8.693** – 50.136*** 2.028 0.308
usdir does not cause 10.453*** 49.868*** 9.681*** – 5.287* 0.657
gc does not cause 0.138 1.267 16.752*** 13.109*** – –
gd does not cause 0.967 2.233 10.475*** 4.367 – –
ALL 22.91*** 63.785*** 46.132*** 75.505*** 11.07 9.827

Notes: ***, ** and * denote significance at 1%, 5% and 10%, respectively. See Table 1 for variables Table 10.
definition Granger causality
Source: Authors’ computation test
JFEP three months of 2020, except for the log of a number of documented cases in China. However,
these results are inconsistent with other recent studies that validated the significant
sensitivity of the stock market to the novel coronavirus (Abu et al., 2021; Ashraf, 2020;
Takyi and Bentum-Ennin, 2020; Goodell, 2020; Sharif et al., 2020; Salisu et al., 2020; Akdag
et al., 2021; Kumeka et al., 2021; Raifu et al., 2021). For example, Takyi and Bentum-Ennin
(2020) reported that following the incidence of Coronavirus, the performance of stock
markets in Africa dropped by around negative 2.7% to 21%. And Akdag et al. (2021) also
documented that the USA – China trade war significantly influenced the stock market
indices of the sampled economies.
Furthermore, we found a bidirectional causality running between the US dollar index
futures and the stock markets in Africa, with significant negative signals in both directions.
The effects appear to be stronger from the foreign exchange market than from the stock
markets, which indicates that exchange rates deteriorate their stock markets returns and
vice versa. Particularly, a rise in the US dollar index appears to result in a fall in their stock
markets performance. A plausible reason for this result may be the perception of domestic
and foreign investors who viewed the COVID-19 pandemic as a financial crisis from the
outset. Also, in the course of the early stages of the outbreak of Coronavirus, most currencies
depreciated against the US dollar. These results signify that returns on stock markets can be
affected by the dynamics in the foreign exchange market and vice versa. Our findings here
validate the cash flow hypothesis, suggesting that a rise or fall in exchange rates (stock
market activities) can substantially affect the stock markets (exchange rates). The
bidirectional negative sign in both directions of this association informs us that the
exchange rate can deteriorate the stock markets, while a rise in stock prices will lead to an
increase in exchange rates of these African economies. Similarly, with regard to the
remaining causalities, we also found evidence of causality running from both directions
between the two commodity markets (gold and crude oil markets) and stock markets in
Africa; with the gold market having a significant negative signal on stock markets, while
stock markets have positive and significant signal on the gold market. This indicates that
the gold market seems to worsen the stock markets, whereas the stock market appears to
enhance activities in the gold market. A plausible reason behind these results is that for the
period of the Coronavirus outbreak, the gold market was perceived as a secured avenue for
investors, which prompted the withdrawal and transfer of capital from stock markets to the
gold market. With regard to stock and crude oil markets, we observe positive significant
bidirectional signals. Though, the relationship appears to be stronger from the stock market
to the oil market. These outcomes portend that not only can the oil market influence the
performances of stock markets of these economies but also, the oil market can be influenced
by their stock market activities. These show evidence of strong connections between stock
returns and oil prices and between stock markets returns and gold prices. This is also a
pointer that stock markets in Africa may be vulnerable to volatilities in commodity market
prices and foreign exchange rates (FX). In theory, the linkage between stock returns and the
returns in oil prices centres on the cash flow hypothesis. Intuitively, the fundamental
hypothesis is founded on the relevance of oil as an important input in the productive
activities of many industries and so cash flow expectations can be influenced by the price of
oil resulting in alterations in costs, returns, dividends, and therefore stock prices (Salisu
et al., 2020; Ashamu et al., 2017; Salisu et al., 2019; Smyth and Narayan, 2018; Salisu and
Isah, 2017; Rafailidis and Katrakilidis, 2014; Basher et al., 2012). Furthermore, given the fact
that causality test results show the significance of the supposed links between these
indicators, much information is not given to the researcher. Therefore, couple with the
causality test, we estimated the FEVD and the IRFs presented in the next section.
4.5 Discussion on the impulse response functions results Stock market
Here our results of the impulse response functions are displayed and discussed. Love and in Sub-
Zicchino (2006) developed the IRFs in panel VAR technique, which are on the basis of
Cholesky decomposition of the variance-covariance matrix residues and ensures that
Saharan Africa
innovations are orthogonalized, Sim (1980) [6]. The IRFs disclose the reaction of a variable
when affected by a variation in another variable(s). Further, it has the capacity of indicating
the period in which the series needs to converge to a steady-state after the event of the shock
or innovation. In our current study, we used 200 Monte Carlo simulations of a Gaussian
approximation to estimate the IRFs confidence intervals following Cholesky decomposition
(Abrigo and Love, 2016). We used IRFs to examine the series shocks to itself and stock
market returns cross shocks. The results as displayed in Figures 1 and 2 show that
following an innovation, all series appear to converge to their steady-state confirming their
stationarity and resilience or flexibility of stock markets in Africa. In Figure 1, starting with
the proxy for COVID-19, the IRFs indicate that growth in global cases of Coronavirus has a
contemporaneous impact on stock market returns; the impact is positive in the first day,

smr : smr smr : gc smr : usdir smr : oilbr smr : goldr

0.015 .01 0 .008 .002
.006
0.01 .005 -.0002 .001
.004
0.005 0 -.0004 .002 0
0 -.0006 0
-.005 -.001

gc : smr gc : gc gc : usdir gc : oilbr gc : goldr

.0015 .2 .0003 0 .0006
.001 .15 .0002 .0004
-.001
.0005 .1 .0002
.0001 -.002
0 .05 0
-.0005 0 0 -.003 -.0002

usdir : smr usdir : gc usdir : usdir usdir : oilbr usdir : goldr

.001 .015 .006 .006 0

0 .01 -.001
.004 .004
.005
-.001 .002 .002 -.002
0
-.002 -.005 0 -.003
0

oilbr : smr oilbr : gc oilbr : usdir oilbr : oilbr oilbr : goldr

.003 .0005 .06 .001
.005
.002 0 .04
0 0
-.0005
.001 .02
-.005 -.001
0 0 -.001
-.01 -.0015

goldr : smr goldr : gc goldr : usdir goldr : oilbr goldr : goldr

.001 .02 .0005 0 .015
0 -.002 .01
0 .01

Figure 1.
-.0005 -.004
-.001 0 .005
-.001 -.006
-.01 0
-.002 -.0015 -.008
0 5 10 0 5 10 0

step
5 10 0 5 10 0 5 10
COVID-19 cases
model – impulse
95% CI Orthogonalized IRF
response functions
impulse : response

smr : smr smr : gd smr : usdir smr : oilbr smr : goldr

.015 .005 .01 .002
0
.01 0 -.0002 .001
.005
.005 -.005 -.0004 0
0 -.0006 0
-.01 -.001

gd : smr gd : gd gd : usdir gd : oilbr gd : goldr

.001 .15 .0004 .001
0
.0003
.0005 .1 .0005
.0002 -.001
0 .05 .0001 -.002 0

-.0005 0 0 -.003 -.0005

usdir : smr usdir : gd usdir : usdir usdir : oilbr usdir : goldr

.001 .005 .006 .006 0
0 .004 .004 -.001
0
-.001 .002 .002 -.002
-.002 -.005 0 -.003
0

oilbr : smr oilbr : gd oilbr : usdir oilbr : oilbr oilbr : goldr

.005 .0005 .06 .001
.002
0 .04
0
.001 -.0005 0
-.005 .02
-.001
0 -.001
-.01 -.0015 0

goldr : smr goldr : gd goldr : usdir goldr : oilbr goldr : goldr

.001 .01 .0005 0 .015
0 -.002
0 .005 .01
-.0005 -.004

Figure 2.
-.001 0 .005
-.001 -.006
-.002 -.005 -.0015 -.008 0
0 5 10 0 5 10 0 5 10 0 5 10 0 5 10

step COVID-19 deaths

95% CI Orthogonalized IRF
model – impulse
impulse : response
response functions
JFEP through to around the third day and then converges to equilibrium in about the fourth to
fifth day. The impact is, however, very low, contemporaneously at around 0.05 percentage
then decreases gradually and stabilizes at about the fifth day. Conversely, shocks to stock
returns do not show evidence of any significant effect on COVID-19, as the zero line is
included in the confidence intervals. Additionally, we confirmed the autoregression of the
major part of the variables by the magnitudes of their own shocks.
Furthermore, in Figure 2, a shock to growth in global COVID-19 deaths causes a
moderate nonlinear significant influence on stock markets returns; a contemporaneous
positive response by stock returns on day one, whereas in the second day it turns negative,
positive in period three and converges to equilibrium in day four. The effect is very minimal
and close to zero; it fluctuates between less than plus 0.05 percentage and less than negative
0.05 percentage ranges. This shows that the growth in Coronavirus reported cases to appear
to exert more impact on stock markets than the reported deaths. These findings on reported
cases and deaths from Coronavirus are consistent with the literature on dangerous diseases,
natural disasters and stock markets, which includes studies such as Rababah et al. (2020),
Ashraf (2020); Baker et al. (2020), Jelilov et al. (2020) and He et al. (2020). For example, Ashraf
(2020) argued that in the early period of the reported cases, the inverse reaction of the market
response to Coronavirus was stronger than around 40 and 60 days following the first index
reported case and concluded that stock markets reacted almost instantly to the outbreak of
Coronavirus disease; however, the reaction fluctuated over time conditional on the stage of
the epidemic.
Next, we present the results for commodity markets and stock market returns. Similar to
the results for COVID-19 proxies, we established stationarity for the commodity prices, as
all variables appear to converge to equilibrium as indicated in Figures 1 and 2. To begin
with, a shock to the gold price also has a nonlinear impact on stock returns in Africa; it
causes a substantial negative response by stock returns in the first and second days, while
around day three it turns briskly to positive, negative again in days three and four and then
converges to equilibrium around day five. Conversely, innovations in the oil market exhibit
a significant positive relationship with stock returns; it is a positive contemporaneous
impact in the first day, through to the fourth day. However, the effect fizzles out at around
the fifth day. Moreover, it is observed that the series own shocks appear to be those with the
highest values, thus validating the fact that the main component of the series is
autoregressive. On the other hand, a shock to stock returns does not have any simultaneous
impact on the two commodity markets (gold and oil prices), but it responded significantly
positively between days two and three, after converging to its steady-state on the fifth day.
This is in line with the theoretical literature, which points that commodity markets have an
immediate effect on stock returns, while stock markets have lagged effects on the
commodity markets (Kumar, 2019). This also confirmed the order of variable arrangements
in our panel VAR system.
Finally, we consider the interaction between stock market returns and the FX. A shock to
the FX market exhibits a simultaneous positive influence on the returns in stock markets;
however, it becomes significantly negative in the third and fourth days and then converges
to equilibrium around the fifth day. Similar to the commodity markets, particularly with the
gold market, stock markets respond to innovations in the exchange rate in a nonlinear
fashion, but the effect is more dramatic when compared with oil and gold prices. This
contradicts the findings in Adeniyi and Kumeka (2020), who documented that exchange
rates neither have symmetric nor asymmetric impact on stock prices in Nigeria. On the
contrary, a shock to stock market returns causes the exchange rate market to react
negatively from the first day through to the fourth day, before returning to equilibrium at
around the fifth period. Figure 1. Moreover, an added fact about our results is that the FX Stock market
market seems to endure more; therefore, any shock or innovation to this market generates an in Sub-
enduring impact on stock returns in Africa. Overall, the results from the IRFs show that the Saharan Africa
stock markets in Africa react contemporaneously to shocks in COVID-19, shocks in
commodities and foreign exchange markets. However, these effects appear to fizzle out over
day five, which indicates the level of resilience and recovery of the stock markets in Africa,
following external shocks.

4.6 Discussion on forecast error variance decomposition results

It is a fact that the IRFs produce information with regard to the effect of innovations in one
variable on the other variables, but lack the ability to provide the scale and magnitude of
these impacts. Therefore, it is recommended to conduct variance decomposition to resolve
this issue (Abrigo and Love, 2016). Furthermore, results of the FEV decomposition give the
researcher an idea about the forecast error variance percentages in the endogenous series,
which are attributable to the shocks to itself and cross shocks from other series. FEVD also
provides the period required for a series to attain equilibrium following the occurrence of a
shock or innovation. In this study, following Abrigo and Love (2016), we computed the
FEVD Cholesky decomposition using 200 Monte Carlo simulations for 10 days.
Table 11, Presents the results of the FEVD achieved from the orthogonalized impulse
response parameter matrices. Considering the stock returns, the outcomes in Table 11

Impulse variables
Response variable Forecast horizon goldr oilbr usdir gc smr

goldr 1 1 0 0 0 0
2 0.966395 9.32E
05 0.032774 0.000122 0.000615
5 0.945828 0.001998 0.041142 0.00015 0.010882
10 0.945383 0.002251 0.041254 0.000167 0.010946
oilbr 1 0.003203 0.996797 0 0 0
2 0.016698 0.974221 0.004783 0.000213 0.004086
5 0.018011 0.956514 0.011328 0.00152 0.012627
10 0.018012 0.956482 0.011353 0.001521 0.012633
usdir 1 0.06991 0.002683 0.927407 0 0
2 0.068724 0.048257 0.876984 0.000795 0.00524
5 0.067436 0.062859 0.857489 0.00162 0.010597
10 0.067426 0.063266 0.85684 0.001712 0.010757
gc 1 0.000317 4.09E
05 0.000241 0.999402 0
2 0.001784 4.11E
05 0.000576 0.997444 0.000154
5 0.002147 0.0003 0.001787 0.995497 0.000268
10 0.002149 0.000325 0.001804 0.995451 0.000272
gd 1 1.44E
08 0.000312 2.65E
06 0.999685 0
2 0.000618 0.000307 7.17E
05 0.998993 1.07E
05
5 0.002128 0.000474 0.000112 0.996632 0.000653
10 0.00213 0.000476 0.000118 0.996623 0.000653
smr 1 0.000327 0.012293 3.21E
05 0.001568 0.98578
2 0.003641 0.017222 0.001082 0.001591 0.976464
5 0.003671 0.020958 0.00917 0.001619 0.964583
Table 11.
10 0.003681 0.021061 0.009187 0.001635 0.964436
Forecast error
Note: See Table 1 for variables definition variance
Source: Authors’ computation decomposition
JFEP indicate that its variance decomposition is for the most part explained by own shocks; that
is, 98.6% on day one, 97.6% on day two, 96.5% and 96.4%, respectively, in the 5th and 10th
days. However, in terms of cross shocks, our results show that shocks in the growth in
COVID-19 cases account for about 0.2% of the changes in stock returns in the 1st day
through to the 10th day. In a similar fashion, growth in global COVID-19 deaths has a very
negligible contribution towards stock returns in these economies. That is, the growth in
COVID-19 deaths explains around 0.02% of the fluctuations in stock returns in days 5 and
10 periods, respectively. Further, considering the effect of non-stock international markets –
commodities, we found that innovations to crude oil prices explain approximately around
1.2% and 1.7% of the variation in stock returns in the 1st and 2nd day, while around 2.1% of
the variations in stock returns were explained in the 5th and 10th days, respectively. Our
findings here are in consonance with the theoretical linkage between oil markets and stock
markets as documented in Bai and Koong (2018), Basher et al. (2012), who argued that
positive shocks from oil supply significantly influenced the Chinese stock market returns. In
terms of the gold market, we observe that the innovation to this commodity explains
approximately 0.36% of the fluctuations in stock returns around day 2 to day 5 and about
0.37% of the changes in stock returns on the 10th day, respectively. Finally and similar to
the results above, the forecast error variance reveals that shocks in the exchange rate market
explain approximately 0.11% of the fluctuations in stock returns on day two, 0.92% of the
fluctuations in stock returns in period five, also about 0.92% of the fluctuations in stock
returns in period 10. Our findings are consistent with previous studies (Bai and Koong, 2018;
Basher et al., 2012; Kilian and Park, 2009; Kilian, 2009), which showed that the exchange rate
market has larger contributions to stock market returns when compared to shocks caused
by pandemic and other commodity markets.
Furthermore, with regard to the gold market, our results show a large amount of own
shocks explanations, with 96.6% for day 2, 94.6% and 94.5% for day 5 and day 10,
respectively. Moreover, it can be seen that shocks to stock markets account for about 1.1%
of the variations on the 5th and 10th days, respectively, indicating that the stock market has
very little influence on the gold market, thereby reaffirming the theoretical postulations of
gold being a safe haven for investors. This is in line with the findings in Salisu et al. (2020).
In addition, the FEVD of Brent crude oil begins by majorly accounting for its own shocks
(around 99.7% on day 1, 97.4% on day 2, 95.7% and 95.6%, respectively, on days 5 and 10).
However, shocks to stock markets account for about 1.3% of the crude oil variations at the
5th and 10th days, respectively. Similar to the abovementioned cases, exchange rate
estimated error variance begins by mostly accounting for own shocks, with about 92.7% on
day 1, however, the effect of the variation weakens as one progresses towards the 10th day.
Shocks to stock markets seem to have very minimal impact on the account of the exchange
rate forecast error variance, which occurs at around 1.1% in the 5th and 10th days,
respectively.
In summary, given the aim of our study, which is to investigate the resilience of African
markets in the midst of a global health outbreak, through stock markets performance, by the
panel VAR causality test relationships, the FEVD and the IRFs. Our results do not show
evidence of a deteriorating impact of the rise in global Coronavirus reported cases and
deaths on the stock markets of these African economies within the period of investigation.
This is consistent with Topcu and Gulal (2020), who concluded that the negative
relationship between Coronavirus disease and stock markets in emerging economies has
slowly reduced and had softened the pedal around the middle of April 2020. Contrary to the
hypothesis that events such as disease outbreaks could adversely affect stock markets
performance and these also contradict the findings documented in Ashraf (2020);
Ichev and Marin
c (2018), etc. However, the lack of evidence from the influence of reported Stock market
Coronavirus cases and deaths was verified by both the Granger causality test and FEVD, in Sub-
which did not display any direct influence on these economies’ stock markets. Moreover, the
outcomes from both the IRFs and FEVD show that the foreign exchange market directly
Saharan Africa
influences the stock markets of countries in Africa. In addition, our results indicate evidence
of substantial causality running from both directions between the US dollars index and
stock markets, with a strong negative signal about the strength of such linkage. Also, this
result is further verified by both the IRFs and FEVD, which reveal that the foreign exchange
market directly influences the stock markets of countries in Africa.
Furthermore, in terms of commodity markets, we find evidence of a causal relationship
running from both directions from crude oil market to stock markets and vice versa; with
the strong positive signal from both directions; the IRFs and FEVD’s results further
confirmed this direct influence on African stock markets. Theoretically, this confirmed the
argument of the direct linkage between crude oil market and stock market returns through
future cash flows as highlighted in Kumar (2019), Kilian (2009) and Hooker (2002); and also
shocks at oil prices can possibly be affected by macroeconomic events as shown in Arouri
and Nguyen (2010). Following the advent of the global Coronavirus outbreak and key
actions taken by oil producers, crude oil prices immensely plummeted. In the past two
decades, oil was sold at its lowest price at less than 15 US dollars/barrel. Oil futures
experienced their lowest contraction in history for the first time, trading less than zero (i.e.
minus $40) on 20 April 2020. Hence, oil price could influence the stock market directly or
indirectly through its effect on production activities and national income. Similarly, our
Granger causality results revealed a bidirectional connection from gold prices to stock
markets and vice versa in these economies. Nonetheless, this effect is strongly negative from
the gold market but moderately positive from the stock markets. But, results from the FEVD
outputs indicate that gold price does play a negligible determining impact on these
economies’ stock markets. However, the results from the IRFs showed that gold price has an
adverse contemporaneous influence on these countries’ stock markets. These findings,
which suggest a deteriorating impact of the gold market on the stock markets, support other
prior empirical studies such as Raza et al. (2016), Mihaylov et al. (2015) and Aggarwal et al.
(2014), which submitted that as gold price rises, stock market prices respond negatively in
the short-term.
Our overall findings support numerous prior empirical studies, which examined the
resilience of stock markets to both global and/or regional/domestic events; for example,
Chakraborty (2012), investigated the resilience of equity and derivatives markets in India
using the VaR approach and found that there are higher losses in the futures market
compared to their corresponding primary spot markets, thereby concluding that the equity
market shows more resilience than the derivative market. Also, Ferreira and Karali (2015)
examined the effect of large-scale earthquakes on stock markets in 35 capital markets using
event study methodology and documented the resilience of global capital markets to shocks
driven by earthquakes – both globally and domestically impacted earthquakes.
Furthermore, Iyke and Ho (2021) analysed the economic implications of escalating
international investor attention related to the Coronavirus outbreak for 14 stock markets in
Africa and documented nine out of the 14 stock markets were not influenced by the global
COVID-19 virus. However, Donadelli et al. (2017) documented that DRNs significantly
influences investors’ sentiments on Wall Street and argued that DRNs (i.e. WHO alerts and
media news) should not prompt rational trading. And, Ichev and Marin
c (2018) argued that
the outbreak of Ebola had the strongest effect on firms whose stocks were more exposed to
the USA and the WAC, suggesting that the news about the outbreak of Ebola events was
JFEP more important for firms that are located nearer to the origin of the disease and has a
connection to the affected the financial markets.
Moreover, our findings on Coronavirus reported cases and deaths are in support of the
results documented by He et al. (2020), who documented that there is a short-run adverse
influence of Coronavirus on the concerned economies and there is a bi-directional contagious
relationship between COVID-19 and stock markets in the Asian economies and, in the
European and American economies. Also, Al-Awadhi et al. (2020), who examined the
contagious nature of Coronavirus and the sectoral stock market outcomes, documented a
negative significant impact of Coronavirus disease on the returns on the stock market in
China. Similarly, Alber (2020) showed high sensitivity of stock market returns to the reported
cases of COVID-19 than the reported deaths. Also, an aggregate number of Coronavirus
indicators has more effect on the stock market than daily new indicators. And further
documented adverse relationship between COVID-19 spread and stock market returns in the
case of Spain, Germany, France and China, while this effect could not be ascertained in the
situations of the US and Italy. Also, Elsayed and Elrhim (2020) documented that different sectors
of the stock market responded more to the aggregate number of cases than daily deaths from
COVID-19, but they are more sensitive to new confirmed cases than to cumulative cases of the
virus. However, our findings contradict the results in other studies such as Baker et al. (2020),
who examined the extraordinary reaction of the stock market in the US to Coronavirus and
documented that no past infectious disease, with the Spanish Flu inclusive, has strongly
influenced financial markets as the current Coronavirus disease. They, therefore, argued that the
possible explanation for this unmatched impact is as a result of the courses of action taken by
various authorities towards curtailing the Coronavirus pandemic. Also, Ramelli and Wagner
(2020) opined that the Coronavirus pandemic signifies an alarming and unparalleled challenge for
both policymakers and financiers and as the virus spread, investors reacted by evaluating the
economic costs and generally concluded that from the viewpoint of actors in the stock market, the
Coronavirus health challenge transformed into a wider financial and economic challenge.

5. Concluding remarks
The COVID-19 pandemics related to socio-economic costs have raised apprehension to
various governments, policymakers, financiers, stock market actors and the world at large.
Hence, this study analysed the resilience of stock markets in the midst of a global COVID-19
outbreak in African economies, specifically during the global health and economic turmoil in
the African financial markets. Specifically, the study examined stock markets resilient
against exogenous shocks in 12 African countries from 2 January 2020 to 31 December 2020
by implementing a pVAR model and Granger causality test approach. After the empirical
analyses, we discovered that the growth in the reported cases and deaths of Coronavirus do
not have a significant influence on stock market returns on these African economies. On the
other hand, variations in the exchange rates and gold prices appear to exhibit a decreasing
effect on stock market returns, while oil prices seem to exhibit an increasing effect on
African stock markets. These results are affirmed by the panel causality test, IRFs and the
FEVD analyses. In general, the results revealed that stock markets in Africa appear to be
flexible and resilient against the COVID-19 outbreak, but affected by other exogenous
shocks such as volatile commodity prices and foreign exchange market, but the effects seem
to be short-lived, that is, between one to five days following a shock. However, the US dollar
index seems to be the biggest headache against the stock markets of these economies.
Hence, our findings in this study have some suggestions for portfolio investors and
policymakers. Policymakers are recommended to concentrate on managing the uncertainties
around their exchange rate markets and develop robust and efficient domestic financial
markets to encourage local and foreign investors. This can be achieved by innovation such Stock market
as the initiative for sustainable finance through the issuance of infrastructure, green and in Sub-
social bonds and privatization of state-owned enterprises. Policies should be put in place to
support financial markets by way of hedging against commodity instability, securing
Saharan Africa
domestic currency financing and insuring against natural disasters and pandemics. Also,
the nonlinear responses of stock markets in Africa indicate policy irregularities and have
negative effects on investors and make certain markets more susceptible to uncertainties
and exogenous shocks. In terms of a global audience, the implication for foreign investors is
that in times of uncertainty such as the global health shocks of COVID-19, stock markets in
Africa may provide alternatives for these investors to diversify their investments.
Our present study is not without some limitations. Besides the pandemic, commodity
markets and exchange rate, stock markets reaction to other issues, such as investor’s fear/
sentiment and global connectivity with other stock markets. Our study also considered only
the crisis period. Hence, future research may attempt to examine the resilience of stock
markets in the pre-COVID-19 and post-COVID-19 periods and consider other variables as
potential avenues for further areas of study.

Notes
1. Similar to the total lockdown caused by the ravaging Coronavirus.
2. Market capitalization on the JSE was approximately US$1tn in 2013. For details see www.jse.co.
za/about/history-company-overview
3. Due to low prices and reduced demand for energy commodities, the FDI slowdown in 2020 was
particularly severe in resource-dependent economies. Significant downside risks for foreign
investment in Africa remain, notwithstanding the sluggish roll-out of vaccinations and the
introduction of new COVID strains and the prospects for a rapid meaningful recovery are dismal.
According to UNCTAD, FDI in Africa would increase modestly in 2021. An expected increase in
commodity demand, new opportunities due to global value chain restructuring, the approval of
key projects and the impending completion of the Sustainable Investment Protocol of the African
Continental Free Trade Area agreement could lead to increased investment by 2022.
4. This becomes a major challenge to most developing countries especially those in Africa who were
already faced with dilapidated health-care systems or nonexistence of adequate health-care facilities.
5. Other studies includes Devpura and Narayan, 2020; Prabheesh et al., 2020; Iyke, 2020a, 2020b;
Narayan, 2020a, 2020b; Salisu et al., 2020; Topcu and Gulal, 2020; Elsayed and Abd Elrhim, 2020;
Takyi and Bentum-Ennin, 2020; Erdem, 2020.
6. For details, see Sim (1980) and Holtz-Eakin et al. (1988) on the recommended ordering of variables
in pVAR IRFs and FEVD analyses.

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JFEP Appendix

PRICE_BOT PRICE_COT PRICE_EGX PRICE_KEN

7,800 160 15,000 2,800

14,000 2,600
7,600
150
13,000 2,400
7,400
140 12,000 2,200
7,200
11,000 2,000
130
7,000
10,000 1,800

6,800 120 9,000 1,600

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
2020 2020 2020 2020

PRICE_MAU PRICE_MOR PRICE_NAM PRICE_NIG

2,400 13,000 1,400 45,000

2,200 40,000
12,000 1,200

2,000 35,000
11,000 1,000
1,800 30,000

10,000 800
1,600 25,000

1,400 9,000 600 20,000

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
2020 2020 2020 2020

PRICE_SA PRICE_TAN PRICE_UGA PRICE_ZAM

60,000 2,200 2,000 4,300

4,200
55,000 2,100 1,800

4,100
50,000 2,000 1,600
4,000
45,000 1,900 1,400
3,900

40,000 1,800 1,200

3,800

35,000 1,700 1,000 3,700

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
2020 2020 2020 2020

PRICE_GOLD PRICE_BRENT PRICE_USD

2,200 70 104

60
2,000 100

50
1,800 96
40

1,600 92
30

Figure A1. 1,400

M1 M2 M3 M4 M5 M6 M7 M8
2020
M9 M10 M11 M12
20
M1 M2 M3 M4 M5 M6 M7 M8
2020
M9 M10 M11 M12
88
M1 M2 M3 M4 M5 M6 M7 M8
2020
M9 M10 M11 M12

Plots of time series

plots of all series Notes: major stock indices of the sampled economies, and Price_Gold is gold futures, Brent is
(original data), 2 the global crude oil benchmark; USD Dollar index is the trade-weighted US dollar index. ----
January 2020 to 31 Marks the date Corona virus was declared global pandemic, i.e. 11 March 2021. All markets
December 2020
crashed during this period
 Stock market
RETURN_BOT RETURN_COT RETURN_EGX RETURN_KEN
.008 .08 .10 .08

.004 .05
.04

in Sub-
.04
.000 .00
.00
-.004 .00 -.05
-.04

Saharan Africa
-.008 -.10
-.04
-.08
-.012 -.15

-.016 -.08 -.20 -.12

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
2020 2020 2020 2020

RETURN_MAU RETURN_MOR RETURN_NAM RETURN_NIG

.2 .050 .2 .15

.025 .10
.1 .1
.000 .05

.0 -.025 .0 .00

-.050 -.05
-.1 -.1
-.075 -.10

-.2 -.100 -.2 -.15

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
2020 2020 2020 2020

RETURN_SA RETURN_TAN RETURN_UGA RETURN_ZAM

.10 .08 .08 .03

.05 .02
.04
.04
.00 .01
.00
-.05 .00 .00
-.04
-.10 -.01
-.04
-.08
-.15 -.02

-.20 -.08 -.12 -.03

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
2020 2020 2020 2020

RETURN_GOLD RETURN_BRENT RETURN_USD

.15 .4 .06

.04
.10
.2
.02
.05
.0 .00
.00
-.02
-.2
-.05
-.04

-.10
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
-.4
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
-.06
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
Figure A2.
2020 2020 2020

Plots of time series of

Notes: The shaded region represents period Corona virus was declared a public health crisis all series (in return), 2
(i.e. March, 2020). All sampled markets experienced high volatility and downturns during this January 2020 to 31
December 2020
period
 JFEP

Table A1.
Stock indices,

at country level
commodity prices
and exchange rate
descriptive analysis
Cote
Properties Botswana D’ivoire Egypt Kenya Mauritius Morocco Namibia Nigeria South Africa Tanzania Uganda Zambia goldr oilbr usdir

Panel A – level
Mean 7,339.232 128.646 11,347.2 2,098.64 1,775.62 10,547.8 1,085.22 1,086.98 48,525.73 1,882.73 1,467.41 4,066.088 1,734.32 42.6256 97.33913
Maximum 7,608.66 146.78 14,108.2 2,707.9 2,247.73 12,633.5 1,318.2 1,320.02 53,350.88 2,130.39 1,861.26 4,264.51 2,069.4 68.91 103.605
Minimum 7,008.82 117.19 8,756.7 1,723.96 1,455.21 8,987.89 739.3 871.26 34,239.3 1,739.63 1,200.36 3,819.96 1,487.1 19.33 92.131
Std. Dev. 206.1227 6.6490 1,403.56 304.702 263.840 1,128.64 131.404 109.209 4,249.016 132.607 212.830 168.193 136.824 12.0498 2.5554
Skewness
0.16135 0.3629 0.7944 0.8849 0.9310 0.6810 0.0052 0.46858
1.4196 0.8079 0.8281
0.1682 0.5079 0.2375
0.3205
Kurtosis 1.4999 2.1357 2.3787 2.2842 2.1140 2.0591 2.4684 2.6984 4.5245 1.9313 1.9992 1.3841 2.5009 2.4273 2.5632
Panel B – returns
Mean
0.0004
0.0016
0.0010
0.0007
0.0021
0.0010
0.0035
0.0002 0.0026
0.0008
0.0014
0.0005 0.0012
0.0013
0.0001
Maximum 0.0060 0.0408 0.0592 0.0350 0.1081 0.0545 0.1041 0.0401 0.0945 0.0191 0.0306 0.0105 0.0577 0.2102 0.0203
Minimum
0.0080
0.0671
0.0934
0.0501
0.0961
0.0882
0.0922
0.0554
0.0992
0.0423
0.0581
0.0177
0.0468
0.2440
0.0153
Std. Dev. 0.0014 0.0104 0.0181 0.0115 0.0165 0.0138 0.0288 0.0115 0.0244 0.0073 0.0134 0.0028 0.0143 0.0482 0.0049
Skewness
1.8988
0.6880
1.1355
0.6575
0.2296
1.7409
0.2183
0.6734 0.0767
1.4109
1.1740
2.2719 0.0148
0.5690 0.6573
Kurtosis 12.1298 11.9026 9.0750 6.0081 21.8582 15.8222 5.1243 8.0456 6.8696 9.6123 6.8522 15.5777 5.7021 11.1308 5.6654
Observations 193 193 193 193 193 193 193 193 193 193 193 193 193 193 193

Notes: Major stock market indices of sampled economies. See Table 1 for variables definition
About the authors Stock market
Terver Kumeka is a PhD candidate at the Department of Economics, University of Ibadan, Nigeria. in Sub-
He is a Lecturer in the Department of Economics Dominican University, Ibadan, Nigeria. His research
interests span across financial economics, international finance, energy economics, development Saharan Africa
economics and tourism economics. He has published in top-rated journals. Terver Kumeka is the
corresponding author and can be contacted at: terverkumeka@yahoo.com
Dr Patricia Ajayi holds a PhD in Economics from the Department of Economics, University of
Ibadan, Nigeria. She had earlier worked in Bowen University, Centre for Management Development
(CMD) and National Centre for Economic Management and Administration (NCEMA). Dr Ajayi’s
research interest is in Energy Economics and Development Economics. She has presented her
research findings in leading conferences, including the Nigerian Economic Society and Nigerian
Association for Energy Economics. Recently, she presented a paper titled “An Analysis of Household
Energy-Saving Behaviour in Ibadan Metropolis” at the Annual Conference of the Nigerian
Association for Energy Economics. She has also published in top-rated journals.
Dr Oluwatosin Adeniyi bagged his PhD in Economics in 2010 at the University of Ibadan. He is a
senior lecturer in the Department of Economics, University of Ibadan. His research interests include
Petroleum and Energy Economics, as well as Macroeconomics. He has published reputable journals
worldwide. Adeniyi is a Member of, African Economic Research Consortium Network (AERC),
Nairobi, Kenya and a Member of, Nigerian Association of Energy Economists (NAEE).

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