Analysis of the Effects of the COVID-19 Crisis on the Persistence and Asymmetry of Volatility in the Paris Stock Market

Abstract

The purpose of this article is to analyze the impact of the COVID-19 crisis on the phenomenon of persistence and asymmetry in the volatility of the Paris stock market. To do this, we have split our series into two periods before (from 01/03/2017 to 10/23/2021) and during (from 01/24/2020 to 10/21/2021) the COVID-19 crisis based on the appearance of the first case of COVID-19 in France (January 24, 2020). Subsequently, we applied a GARCH model to capture the phenomenon of volatility persistence and the EGARCH and GJR-GARH models for asymmetric effects. The conclusions of this work led firstly to the confirmation of the increase in the persistence of the volatility of the CAC All-Share and CAC 40 indices and secondly to the appearance of an asymmetry effect in the behavior of volatility. These results imply that unlikely events outside the financial markets produce turbulence and uncertainties that drive the level of volatility to very high peaks following fluctuations in the valuation of financial assets listed on the stock exchange.