The 2020 COVID-19 Financial Crisis Impact on the European Stock Markets and Economies. A Preliminary Analysis

Abstract

Abstract Research background In mid-April 2020, the global financial markets plunged into financial crisis from the unprecedented worldwide lockdowns for an extended period. Purpose This paper looks at the COVID-19 pandemic impact on the selected European stock markets and economies in comparison to USA, Israel, and China. The goal of the research is to find out if the pandemic affected different national economies and capital markets in the same way. Research methodology An empirical investigation is conducted for daily returns from stock indexes characterizing 5 developed and 4 post-communist European stock markets together with the above mentioned 3 non-European ones, using statistical inference and a correlation analysis. Results Our study shows that the COVID-19 pandemic financial crisis had a similar impact on all of the analyzed economies. Although, the GDP growth rate and inflation differ among countries. GDP growth rates in 2021 did not offset the declines from the previous year in Czechia, Germany, France, Italy and the UK. GDP growth and inflation rates in 2021 are bigger in European post-communist countries than in developed countries. All markets apart from the NASDAQ100, SSE, DAX and MSCI Europe reported negative annual rates of return in 2020. The highest risk was observed in the pandemic shock period. In the pandemic stabilization period expected returns from all stock indexes (except FTSE100 and TA35) were significantly positive. Novelty A comparison of selected markets and economies in different stages of the pandemic. Our study shows that financial markets should now incorporate such an event caused by a pandemic as part of financial crisis studies.