Asymmetric information flow to G7 and Nordic equities markets during COVID-19 pandemic

• Published in: The Journal of Risk Finance
• Main Authors: Owusu Junior, Peterson, Hung, Ngo Thai
• Format: Article in Journal/Newspaper
• Language: English
• Published: Emerald 2023
• Subjects: Iceland
• Online Access: http://dx.doi.org/10.1108/jrf-06-2022-0129; https://www.emerald.com/insight/content/doi/10.1108/JRF-06-2022-0129/full/xml; https://www.emerald.com/insight/content/doi/10.1108/JRF-06-2022-0129/full/html

Purpose This paper investigates the probable differential impact of the confirmed cases of COVID-19 on the equities markets of G7 and Nordic countries to ascertain possible interdependencies, diversification and safe haven prospects in the era of the COVID-19 pandemic over the short-, intermediate- and long-term horizons. Design/methodology/approach The authors apply a unique methodology in a denoised frequency-domain entropy paradigm to the selected equities markets (Li et al . 2020). Findings The authors’ findings reinforce the operability of the entrenched market dynamics in the COVID-19 pandemic era. The authors divulge that different approaches to fighting the pandemic do not necessarily drive a change in the deep-rooted fundamentals of the equities market, specifically for the studied markets. Except for an extreme case nearing the end (start) of the short-term (intermediate-term) between Iceland and either Denmark or the US equities, there exists no potential for diversification across the studied markets, which could be ascribed to the degree of integration between these markets. Practical implications The authors’ findings suggest that politicians should pay closer attention to stock market fluctuations as well as the count of confirmed COVID-19 cases in their respective countries since these could cause changes to market dynamics in the short-term through investor sentiments. Originality/value The authors measure the flow of information from COVID-19 to G7 and Nordic equities using the entropy methodology induced by the Improved Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (ICEEMDAN), which is a data-driven technique. The authors employ a larger sample period as a result of this, which is required to better comprehend the subtleties of investor behaviour within and among economies – G7 and Nordic geographical blocs – which largely employed different approaches to fighting the COVID-19 pandemic. The authors’ focus is on diverging time horizons, and the ICEEMDAN-based entropy would ...