Covid-19 impact on Johannesburg Stock Exchange for the duration of the pandemic period

Dube, Siyabonga

Covid-19 impact on Johannesburg Stock Exchange for the duration of the pandemic period

Thesis / Dissertation

2025

Publisher

University of Cape Town

Department

Graduate School of Business (GSB)

Faculty

Faculty of Commerce

Abstract

For a considerable time and for different reasons, the financial system shocks endured during rare events continue to pique investors' and policymakers' keen interest. Consequently, this study explores COVID-19's impact on the JSE. The pandemic caused significant shocks to financial systems and economies. Uncertainties emanating from investor fear in response to the pandemic outbreak affected portfolio investment decisions. Additionally, policymakers implemented ‘social distancing' and stringent measures to restrict the contagion of the health crisis, which had a disruptive impact on global value chains. To limit these adverse effects, policymakers — subject to budgetary constraints — implemented fiscal, monetary, and other stimulus packages to lessen the adverse impact on the real economy. Extensive studies have examined the reaction and recovery of financial and economic markets following pandemic-induced shocks. These studies draw on theories from behavioural finance, financial risk contagion, and the efficient market hypothesis to analyse market responses and stability. This dissertation builds on the existing literature by examining the health crisis' transmission to the financial markets in an emerging economy. The study employed new deaths and stringency measures implemented during the pandemic period as proxies for COVID-19 and assessed their impact on ALSI returns, the variable of interest, using a quantile regression estimation technique. The results indicate a level of collinearity and multicollinearity between ALSI returns and global financial market performance indicators. The correlation between ALSI returns, the S&P 500 and Implied Volatility is statistically significant at 0.716 and –0.600 respectively. This outcome indicates the deepened integration of South African financial markets with the globe. The flight to safe havens was not observed. Contrasting ALSI returns with macroeconomic factors represented by crude oil and the rand–dollar exchange rate, the relationships are statistically insignificant. The real economy disturbances do not appear to have been transmitted to the financial markets in the long term. Progress in vaccine development and coordinated global policy interventions may have limited the sustained adverse impact on the real economy. This study offers key recommendations for portfolio design, policymaker intervention timing, and the balance between economic stimulation and containment efforts during pandemics.