Financial Market Risk Analysis Before the Pandemic and During the COVID-19 Period

Document Type : Research Paper

Authors

1 Department of Financial Management and Insurance, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran.

2 MA. Financial Management, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran.

Abstract

In this study, we intend to analyze the risk of investing in financial markets such as the Tehran Stock Exchange and the S&P500, as well as investing in precious metals such as gold and silver before the outbreak of the Corona pandemic and during it separately. Secondly, we investigate the correlations between the markets mentioned above. For this purpose, we use the fractional cumulative residual entropy for our analysis. The results of fractional cumulative residual entropy show that for all markets, randomness and irregularity have increased since the outbreak. This indicates that the risk has generally increased after the outbreak of the virus in the markets. Furthermore, correlation results showed that the information sharing network between markets changed during the Covid-19 pandemic. From a financial and managerial point of view, the results show that: 1- Investing in a basket consisting of silver and gold, silver and S&P500, silver and the overall index of the TSE can be riskier due to the increase in the level of correlation and mutual information between these pairs of markets during the period of the pandemic. 2- Gold showed the lowest level of information deviation after the pandemic, indicating that information perceived by gold investors did not significantly affect their fears during the Covid-19 pandemic. 3- It is possible to create a safer investment portfolio by investing in S&P500 and gold. The results provide insights into the reaction of financial markets and precious metals to investor expectations after the Covid-19 pandemic.

Keywords

Main Subjects

References

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Strategic Studies of public policy
Volume 11, Issue 40 - Serial Number 40
December 2021
Pages 210-226

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