Title: Volatility dynamics of Tunisian stock market before and during COVID-19 outbreak and diversification benefits of Bitcoin

Authors: Marwa Ben Salem; Mohamed Fakhfekh; Ahmed Jeribi

Addresses: Department of Economic Sciences, Faculty of Economics and Management of Sfax, Road of Airport Km 4, Sfax 3018, Sfax, Tunisia ' Department of Finance, Higher Institute of Business and Administration of Sfax, Road of Airport Km 4, 1013 Sfax, Tunisia ' Department of Finance, Faculty of Economics and Management of Mahdia, Road Taher Hadded B.P 56, Monastir 5000, Tunisia

Abstract: The objective of this paper is to select the appropriate GARCH model fit for analysing the volatility dynamics of the Tunisian sectoral stock market indices and Bitcoin during the COVID-19 outbreak period as well as to examine the Bitcoin diversification benefits. On using four models (EGARCH, FIGARCH, FIEGARCH, and TGARCH) and mean-variance spanning test, our findings prove that following the COVID-19 outbreak, the consumer service, financial and distribution, industrial, basic materials and banking sectors' return volatilities tend to have a relatively high positive and significant asymmetric effect, as compared to the pre-COVID period. Similarly, the results reveal that the Bitcoin proves to bring about significant diversification benefits once incorporated into a well-diversified benchmark portfolio, predominantly throughout the COVID-19 outbreak. Overall, our results could be of great benefit to investors seeking to account for any future volatility and implement special hedging strategies under COVID-19 crisis.

Keywords: Tunisian sectoral stock market indices; GARCH models; COVID-19 outbreak; Bitcoin; mean-variance spanning test.

DOI: 10.1504/AAJFA.2023.133407

Afro-Asian Journal of Finance and Accounting, 2023 Vol.13 No.5, pp.651 - 672

Received: 16 Jul 2020
Accepted: 28 May 2021
Published online: 15 Sep 2023 *

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