Stock Market Reactions to COVID-19; Analysing Random Walk Process for U.S. and Nigerian Stock Market Using GARCH Model

The recent COVID-19 pandemic in China sent waves of shocks across several markets worldwide. This pandemic was noticed to exert varied effects on the stock markets, with the developing market being the most affected. While some markets had recorded positive growth in their stock market indices, there were several other markets recorded to have responded indifferently to the shocks. This study examined if the variability in returns of stocks in both Nigeria and Dow Jones markets follows the random walk process during COVID-19 using data from January 2020 to August 2022. The result obtained from applying the GARCH (I, I) model revealed that both markets defer in their nature of the response to COVID-19. There is no random walk process in any market. This result signifies that even though markets followed synchronised movement during pandemics, portfolio diversification was still possible in reducing the shocks from the spillover effect of COVID-19.