FINANCIAL

MARKET CRISIS
AND IMPACT OF
COVID-19:CROSS
COUNTRY ANALYSIS

Presented By:-
Pooja Kumari
(120030)
 FINANCIAL CRISES : OVERVIEW

severe distribution
large scale balance
Component:- on financial large scale
sheet problems (of
intermediate & government support
substantial change supply of external firms, household,
(in the form of
in credit volume & financing to various financial
liquidity support &
asset price intermediaries &
sector of the sovereign).
sovereign),
economy
TYPES CAUSES

Currency and • financial crises preceded by

sudden stop asset and credit that eventually
crises turn into busts can be seen as the
most common underlying factor.
Debt and banking
crises • contagion and spillover among
financial markets.
• The emergence of asset busts,
Pandemic crises credit crunches.
 OBJECTIVE

• To explore the historical perspective of the financial crises and

1 highlighting some historical incidents.

• To uncover the possible reason behind the volatility in the stock

2 markets of India, US, China and Italy since outbreak of covid-19.

• To explore counterfactual impact of COVID 19 on stock market

3 index across four countries, namely India, US, China, Italy.

• To explore interdependence among stock market indices and covid-

4 19 outbreak in four countries, namely India, US, China, Italy
 METHODOLOGY-1&2

1 Explore different
financial crises
2
and identify Explore volatility in stock market
possible reason indices in four countries namely
behind them India, China, US and Italy since
through survey of outbreak of pandemic and identify
existing literature possible reasons behind through
publishedreport, newspaper
article, journal publication.
 METHODOLOGY-3
To explore the financial crisis created
during pandemic volatility of the
stock price indices of four countries Country Stock Price
has been assessed.
Index
stock price value of four identified
stock indices has been collected
between2nd June 2019 to 17th May
2020 on weekly basis. India Nifty 50
To explore the Pre and Post COVID China Shanghai
19 views of stock markets the above
time period is break into two parts Composite
like 8 months and 4 months.
Italy FTSE MIB
The forecasted value of 4 months and
its trend line is calculated by applying U.S Nasdaq 100
linear trend regression.
 • The formula of trend Projection to analyze the
Trend impact of the COVID-19 on the stock markets:
projection • Tt = b0 + b1t………………………………………
(least Square where Tt is the linear trend forecast in period t, b0
method) is the intercept of the linear trend line, b1 is the
slope of the linear trend line and, t is period.

• 
Forecasting
 METHODOLOGY-4
stock price value of four
identified stock indices and
no. of confirmed cases has
The interrelation between
the prices of the share been collected between 17th
market and no of infected February 2020 to 17th May
person was explored by 2020 on daily basis.
using the following simple
regression equation:
Y=a+bx+€……………
• where Y- is value of the stock
market index of concerned
country
• x - no. of an infected person
with Covid-19 in the
concerned country
 DATA SOURCES

Data Sources
Nifty 50 https://www.investing.com/
Nasdaq 100 https://www.investing.com/
FTSE MIB https://www.investing.com/
Shanghai Composite https://www.investing.com/
No. of confirmed cases https://www.who.int/emergencie
s/diseases/novel-coronavirus-201
9/situation-reports
 THE GREAT DEPRESSION
Situations

Aftermath of US stock crash a

series of bank panics
16 mn shares were traded
On October 25, 1929 emanated from Europe in
after five days, on "Dark
the New York Stock 1931 spreading financial
Tuesday" and make another
Exchange saw 13 contagion to United States,
rush of uproar on Wall Street
million shares being United Kingdom, France and
as Millions of offers wound
sold in panic selling. eventually the whole world
up uselessly on “margin".
spiraled downward into the
Great Depression.
 Reasons

Unequal Distribution of
Wealth and Income

15 million Americans were Unequal Distribution of

unemployed, 20,000 companies Corporate Power
went bankrupt and a majority
of American banks failed. It Bad Banking Structure
lasted from 1929 to 1939
Foreign Balance of
Payment
Decrease in Money
Supply
 THE GREAT RECESSION 2006
Reasons Situations
• 2008 extreme downturn, the most profound
contraction on the world economy since 1930.
• United States GDP fell by nearly 4 percent in the
Lax 4th quarter of 2008 US market indices, the
regulatory S&P500 down by 45 percent from its 2007 high.
• Monetary mammoths, for example, Bear
Stearns,
Loosen Lehman Brothers, Merrill Lynch, AIG,
macroecono FannieMae, and Citigroup have either vanished
mic policies or been safeguarded through huge government
bailouts.
• The US Federal Reserve and the European
Central Bank injected US $ 2.5 trillion into the
credit markets.
 VOLATILITY AND REASON BEHIND
To discover the purpose behind
instability in stock INDEX of India, the
US and Italy, we start our investigation
from the most recent seven day stretch
of Feb to 17th may with the assistance
of different Newspaper Article and
change of more than 5-6% in Indices is
pulled.
In case of china updates on Jan , Feb
and March is assessed to break down
reasonable justification behind the
unpredictability of stock index. The
reason behind it is the early breakout
of COVID-19 in China.
 COUNTRY REASON BEHIND
VOLATILITY

INDIA • Impact of change in U.S. • Impact of merger & acquisition

Monetary policies
• impact of change in RBI
policies like: infusion, rate
cut,$ swap
• Impact of Corona virus
•Impact of government capital
infusion/relief package
RIL and face book deal
• Impact of U.S. China trade
tension
•Impact of lockdown
•Impact of plunged in oil price/

China • Increase in death toll due to covid •Impact of ease in u.s. China trade
•Decline in oil prices war as u.s. Reduces tariff rate
•Decrease in factory output •Impact of liquidity infusion by PBC
bank.
Italy •Impact of corona virus spread outside • Unilateral ban by Trump on travel
the china from 26 European countries.
•Impact of complete lockdown in •Impact of capital infusion.
Lombardy
U.S. •News of spreading virus in American and •Impact of oil price war
European Countries. •Impact of Government monetary
•Impact of Monetary relief by Federal relief.
reserves
COUNTERFACTUAL IMPACT OF COVID 19 ON VALUE OF

STOCK MARKET INDEX

For the current examination on taken
countries Firstly, the week by week
estimations of stock indices between
second June 2019 to seventeenth May
2020 have been taken.
The value have been separated into
double cross period between second
June 2019 to 29th December 2019
and first January 2020 to
seventeenth May 2020.
 CONTD....

To discover this we take week

after week information from from the graph we
Now we expect the
second June to work 29th can predict pre and
circumstance if there is no
December as a benchmark and post COVID
pandemic happen what will
forecast the value of next five situation of stock
be the value of stock price
months and trend line applying the indices of India, US,
and their trend line.
least square strategy method China and Italy.
discussed in methodology.
 CASE FOR INDIA

Actual and Forecasted Trendline of Nifty 50

14000

For the current examination on India 12000

similar time period and approach is 10000

used to anticipate stock index 8000

behavior a similar time period and 6000

approach discussed in methodology 4000
is used to anticipate stock index 2000
behavior. 0
0 20 020 020 020 020 020 020 020 020 020 020 020 020 020 020 020 020 020 020 020
,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2
05 12 19 26 02 09 16 23 r 01 r 08 r 15 r 22 r 29 r 05 r 12 r 19 r 26 03 10 17
n n n n b b b b y y y
Ja Ja Ja Ja Fe Fe Fe Fe Ma Ma Ma Ma Ma Ap Ap Ap Ap Ma Ma Ma

Forcasted Value Actual value

 CONTD....
• The interdependence between COVID 19 outbreak and India stock price:
Nifty 50

Variables
Regression Results Result At less than 10%
Stock Index Coefficient S. E P value significance level
• Dependent Variable:- Nifty 50
Values for every
Number of -.0116367* .006745 0.090 additional case of
Infected covid-19 found to
Constant 9834.837 191.1978 0.000 reduce the value of
No. of Obs 58 Nifty50 by 0.0116
F Value 2.98* unit.
R –Squared 0.0505
Adj R-Squared 0.0335
*** Significant at less than 10%
 CASE OF U.S.

Actual and Forecasted Trendline of Nasdaq

100 In case of U.S. a similar time
12,000.00 period and approach is used
10,000.00 to anticipate stock index
8,000.00
behavior. diagram
The accompanying
6,000.00 delineates the fluctuation of
4,000.00
stock price due to COVID -
2,000.00
19 around forecasted value
0.00
over the couple of months
, 2
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
02 2 02 202 2 02 20 2 2 02 20 2 202 202 202 20 2 202 20 2 202 20 2 202 20 2 202 2 02 202
, , , , , , , , , , , , , , , , , , ,
and portray the pre and post
n
05 12 19 26 02 09 16 2 3 r 01 r 0 8 r 15 r 2 2 r 29 r 0 5 r 12 r 1 9 r 26 03 10 17
n n n b b b b
Ja Ja Ja Ja Fe Fe Fe Fe Ma Ma Ma Ma Ma Ap Ap Ap Ap Ma Ma Ma
y y y circumstance.
Actual Value Forecasted Value
 CONTD….
• The interdependence between COVID 19 outbreak and US stock price:
Nasdaq 100
Variables Result
Stock Index Coefficient S. E P value At less than 1%
Values significance level
Number of .0007097*** .0001628 0.000 for every
Infected additional case of
Constant 8130.062*** 104.1315 0.0000 covid-19 found to
No. of Obs 63 increase the value
F Value 19.00*** of Nasdaq 100 by
R –Squared 0.2375
0.007097 unit.
Adj R-Squared 0.2250

***Significant at less than 1%

 CASE OF ITALY

Actual and Forecasted Trendline of FTSE MIB

30000 In case of Italy a similar
time period and approach is
25000
used to anticipate stock
20000 index behavior.
15000
The accompanying diagram
delineates the fluctuation of
10000 stock price due to COVID -
5000
19 around forecasted value
over the couple of months
0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 and portray the pre and post
02 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202
, 2 , , , , , , , , , , , , , , , , , ,
05 12 19 26 02 09 16 23 r 01 r 08 r 15 r 22 r 29 r 05 r 12 r 19 r 26 03 10 17
n n n n b b b b y y y
, circumstance.
Ja Ja Ja Ja Fe Fe Fe Fe Ma Ma Ma Ma Ma Ap Ap Ap Ap Ma Ma Ma

Actual Value Forcasted value

 CONTD….
• The interdependence between COVID 19 outbreak and Italy stock
price: FTSE MIB
Variables Result
FTSE MIB Coefficient S. E P value
Values At less than 1%
Number of -.0171046 .0033724 0.0000 significance level
Infected for every
Constant 4263.759 275.7923 0.0000 additional case of
No. of obs
*** Significant at less than 1% 61 covid-19 found to
F Value 25.72*** dropped the value
R –Squared 0.3036 of FTSE MIB by
Adj R-Squared 0.2918 -0.171046 unit.
 CASE OF CHINA

Actual and Forecasted Trendline of Shanghai

Composite
3,200
For China, we take week by week 3,100
information up to 24th November as a 3,000
benchmark and forecast the estimation of 2,900
the following five-month and exceptional 2,800
trend line by applying the least square 2,700
technique talked about in the approach. 2,600

• The purpose for it is the early breakout of 2,500

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02
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2 2 2 2 2 2 2 2 2 2 2 2 2
COVID-19 in China. ec
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D D D Ja Ja Fe Fe M M A A M M

Actual value Forecasted value

 CONTD…

• The interdependence between COVID 19 outbreak and China stock price: Shanghai
Composite
Variables Result
Shanghai Coefficient S. E P value
At less than 1%
Composite Index
Number of -.0171046*** .0033724 0.0000
significance level
Infected for every
Constant 4263.759 275.7923 0.0000 additional case of
No. of Obs 61 covid-19 found to
F Value 25.72*** dropped the value
R –Squared 0.3036 of Shanghai
Adj R-Squared 0.2919 Composite by -
0.171046 unit.
***Significant at less than 1%
 Actual and Forecasted value Trendline of Nifty 50 Actual and Forecasted Trendline of Nasdaq 100
14,000.00 12,000.00
12,000.00 10,000.00
10,000.00
8,000.00
8,000.00
6,000.00 6,000.00
4,000.00 4,000.00
2,000.00
2,000.00
0.00
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 02 2 02 2 02 2 02 2 02 2 0 2 20 2 20 2 20 2 2 02 202 202 2 02 20 2 202 202 20 2 202 2 02 202 0.00
, , , , , , , , , , , , , , , , , , , , 2 0 02 0 02 0 02 0 02 0 020 02 0 020 020 0 20 020 0 20 020 0 20 020 0 20 02 0 02 0 02 0 02 0
05 1 2 19 26 02 0 9 16 23 r 0 1 r 08 r 15 r 2 2 r 29 r 0 5 r 1 2 r 1 9 r 2 6 03 10 17 0
n n n n b b b b y y y ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2
Ja Ja Ja Ja Fe Fe Fe Fe Ma Ma Ma Ma Ma Ap Ap Ap Ap Ma Ma Ma 05 12 19 26 02 09 16 23 r 01 r 0 8 r 15 r 2 2 r 2 9 r 0 5 r 1 2 r 1 9 r 26 03 10 17
n n n n b b b b y y y
Ja Ja Ja Ja Fe Fe Fe Fe Ma Ma Ma Ma Ma Ap Ap Ap Ap Ma Ma Ma
Actual value Forcasted Value
Actual and Forecasted Trendline of FTSE MIB Cross Country Actual Value Forecasted Value
30000
Analysis Actual and Forecasted Trendline of Shanghai
25000 Composite
3,200
20000
3,100
15000 3,000
2,900
10000 2,800
2,700
5000 2,600
2,500
0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 19 0 19 0 19 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20
2 02 202 2 02 2 02 20 2 20 2 20 2 20 2 202 20 2 202 2 02 202 2 02 202 20 2 20 2 202 2 02 202 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2 ,2
, , , , , , , , , , , , , , , , , , , , 01 15 29 12 26 09 23 08 22 0 5 1 9 03 17
05 12 1 9 26 0 2 09 1 6 23 r 0 1 r 0 8 r 15 r 22 r 29 r 05 r 1 2 r 1 9 r 26 03 10 17 ec ec ec an an b b ar ar pr pr ay ay
n n n n b b b b y y y D D D J J Fe Fe M M A A
Ja Ja Ja Ja Fe Fe Fe Fe Ma Ma Ma Ma Ma Ap Ap Ap Ap Ma Ma Ma M M

Actual Value Forcasted value Actual value Forecasted value


The graph portray, the effect
of COVID 19 on the four
nations'
• stock index is diverse like
some are less volatile some
are more, when they are
analyzed in a similar time
period .
CONTD…
By computing standard
deviation of %change in
value(actual-Forecasted) The US stock list is more
• we can foresee that Italy steady than these two
stock file is increasingly and its deviation is 9%
unstable as its deviation is
16% trailed by India
whose deviation is 13.3%
 CONTD…

Stock Index Std. Dev ( %actual

value-%forecasted
China's stock list is value)
progressively steady
paying little heed to
COVID 19 Pandemic as Nifty 50 13.31%
its deviation is just
which is 4% Nasdaq 100 9%
exceptionally short of FTSE MIB 16%
what others.
Shanghai 4%
Composite
 CORRELATION

Country correlation
India -0.2247
The findings of correlation uncovered that
• negative correlation between the number of US 0.4873
COVID 19 infected cases and value of
stock market index for India, China and Italy -0.5510
Italy on the US index is positive correlated
• If the estimation is betweedcontraryonen
17th Feb to 17th May on daily basis China -0.5510
 CONCLUSION
Main causes behind historical event
• unprecedented rose in stock
prices i.e. formation of asset
bubble.
• Lax monetary policy.
• Loosen macroeconomic policies.
By review, we find four types of reasons
for volatility in stock markets-
• change in Fiscal/Monetary Policy
decision
• change in the global scenario
• Performance of some big corporate
• Pure Speculation
 CONTD...
The findings of correlation uncovered that
• There is a significant negative correlation
found between the quantity of COVID 19
affirmed cases of India, china and Italy
stock index.
• But positive correlation found between the
quantity of COVID 19 affirmed case and the
stock index of US.
Standard deviation discovered that
• China’s stock index stays steadier
than India, US, and Italy paying
little mind to the current pandemic.
• Italy stock index is increasingly
unstable trailed by India and the
US.
VOLATILITY IN CURRENCIES

Country Std. of currencies (17th Feb to 17th May)

India 0.49%

US

China 0.26%

Italy 0.59%
LEARNING FROM TAKEN STUDY

• Better understanding of stock markets.

• Finding can be done by different approach.
• Better understanding in selecting of important news.
THANK YOU!