The Impact of the COVID-19 Pandemic on Global Stock Market Volatility: An Integrated Analysis Using Event Study and GARCH Models

The COVID-19 pandemic, which started in late 2019, caused unprejudiced swings in the global stock markets that showed in a turbulent economy and financial system. This research expands the investigation to the main stock indices, such as S&P 500 (U.S.), CSI 300 (China), FTSE 100 (UK), and DAX (Germany), to show their response to the pandemic-induced shocks which occurred during 2019 to 2021. Carrying out event studies and the GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model, the researchers bring to light that there are significant negative abnormal returns after the occurrence of major world events. The events investigated by this approach are WHO’s declaration of a Public Health Emergency of International Concern (PHEIC) and lockdowns worldwide. The results of GARCH analysis, which also show emerging markets bearing greater volatility persistence than their developed counterparts, point to the discussed structural vulnerabilities in capital distribution, liquidity, and the communication mechanisms of crises. Such differences are probably indications of the importance of specific market strategies of risk association and, therefore, emphasize the reflection of resilience of the system to the external shocks. The inclusion of various analytical tools not only enhances the comprehension of market behavior during the times of pandemic but also instills a concrete framework to help contextualize the investor reactions in periods marked by the uncertainty and asymmetric information.