Predicting financial market returns in the presence of health crisis: evidence from conventional and Islamic stock markets

Figures & data

Table 1. Used data set.

İslamic stock markets	Conventional stock markets
Basic materials	Basic materials
Consumer goods	Consumer goods
Consumer services	Consumer services
Financials	Financials
Health care	Health care
Industrials	Industrials
Oil and gas	Oil and gas
Technology	Technology
Telecommunications	Telecommunications
Utilities	Utilities
All sectors	All sectors
Health news COVID-19 death news COVID-19 case news

Source: The Author.

Table 2. Descriptive statistics for conventional and Islamic stock markets.

	Basic materials	Consumer goods	Consumer services	Financials	Health care	Industrials	Oil and gas	Technology	Telecommunications	Utilities	All sectors
Conventional stock markets
Mean	0.034	0.001	0.032	−0.203	0.032	−0.082	−0.328	0.065	−0.118	−0.147	−0.046
Median	0.414	0.170	0.348	−0.099	0.049	0.146	−0.033	0.506	−0.130	0.062	0.156
Maximum	11.358	7.674	7.253	11.338	7.331	11.396	14.871	10.695	7.893	12.223	7.960
Minimum	−11.472	−10.544	−11.718	−15.853	−10.820	−13.320	−23.179	−14.599	−8.565	−12.248	−9.969
Std. Dev.	3.437	2.787	2.761	3.891	2.684	3.452	5.093	3.338	2.494	3.511	2.447
Skewness	−0.614	−0.696	−0.955	−0.509	−0.371	−0.465	−0.932	−0.582	0.027	0.028	−0.991
Kurtosis	5.434	5.850	6.917	5.709	5.693	5.624	6.817	6.932	5.175	5.686	7.333
Jarque-Bera	35.003	47.370	89.430	39.426	36.732	36.490	84.935	79.163	22.297	33.992	106.885
Probability	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000
İslamic stock markets
Mean	0.073	0.023	0.006	−0.037	0.060	−0.011	−0.267	0.088	−0.087	−0.045	0.035
Median	0.137	0.256	0.245	0.084	0.008	0.004	−0.098	0.389	−0.097	−0.060	0.286
Maximum	9.612	5.752	9.110	11.021	5.804	9.073	13.473	8.483	3.449	3.532	7.913
Minimum	−10.438	−9.330	−12.876	−13.729	−7.891	−9.586	−18.864	−12.479	−4.002	−5.442	−9.653
Std, Dev,	2.373	1.977	2.675	3.234	2.016	2.508	4.338	2.877	1.174	1.401	2.414
Skewness	−0.858	−1.096	−1.231	−0.353	−0.515	−0.584	−0.930	−0.706	−0.424	−0.933	−0.842
Kurtosis	8.682	7.763	9.781	6.503	5.704	6.424	6.805	7.035	4.796	5.587	7.160
Jarque-Bera	165.853	129.423	245.040	60.116	39.424	61.608	84.458	86.053	18.571	47.905	94.829
Probability	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000	0.000

Source: The Author.

Table 3. Descriptive statistics for COVID-19 cases, COVID-19 deaths and health news.

Google trend volumes for news
	Negative COVID-19 case news	Positive COVID-19 case news	Negative COVID-19 death news	Positive COVID-19 death news	Negative health news	Positive health news
Mean	69.788	45.646	115.354	71.575	50.434	43.575
Median	77	50	132	77	56	52
Maximum	107	86	188	154	81	78
Minimum	0	0	0	0	0	1
Std. Dev.	32.955	32.038	57.712	53.608	22.421	25.484
Skewness	−1.048	−0.308	−0.808	−0.091	−0.916	−0.481
Kurtosis	2.912	1.542	2.520	1.460	2.960	1.833
Jarque-Bera	20.715	11.791	13.382	11.324	15.815	10.770
Probability	0.000	0.003	0.001	0.003	0.000	0.005

Source: The Author.

Table 4. Results of model using historical returns.

	Conventional stock markets			İslamic stock markets
	Coeff.	T Statistic	Probability	Coeff.	T Statistic	Probability
Basic materials	−0.207	−2.225	0.028**	0.018	0.194	0.846
Consumer goods	−0.264	−2.877	0.005*	−0.062	−0.65	0.517
Consumer services	−0.326	−3.629	0.000*	−0.205	−2.21	0.029**
Financials	−0.282	−3.095	0.003*	−0.317	−3.527	0.001*
Health care	−0.357	−4.019	0.000*	−0.221	−2.385	0.019**
Industrials	−0.247	−2.683	0.008*	−0.067	−0.706	0.482
Oil and gas	−0.144	−1.532	0.128	−0.131	−1.388	0.168
Technology	−0.458	−5.419	0.000*	−0.388	−4.428	0.000*
Telecommunications	−0.352	−3.956	0.000*	0.079	0.838	0.404
Utilities	−0.212	−2.279	0.025**	0.108	1.142	0.256
All sectors	−0.17	−1.819	0.072**	−0.266	−2.908	0.004*

Notes: *, ** and *** show significance at 1%, 5% and 10%, respectively.

Source: The Author.

Table 5. Predictability results of sectoral stock returns for conventional stock markets.

	Equation (5)(5) $$r_{it=}\propto +{\beta }_1^{+}{\mathit{healthnews}}_{i,t-1}^{+}+{\beta }_2^{-}{\mathit{healthnews}}_{i,t-1}^{-}+{\epsilon }_{it}$$(5)						Equation (6)(6) $$r_{it=}\propto +{\beta }_1^{+}{\mathit{Covid}-19d\mathit{eath}}_{i,t-1}^{+}+{\beta }_2^{-}{\mathit{covid}-19d\mathit{eath}}_{i,t-1}^{-}+{\epsilon }_{it}$$(6)						Equation (7)(7) $$r_{it=}\propto +{\beta }_1^{+}{\mathit{Covid}-19c\mathit{ase}}_{i,t-1}^{+}+{\beta }_2^{-}{\mathit{Covid}-19c\mathit{ase}}_{i,t-1}^{-}+{\epsilon }_{it}$$(7)
	Health news (Positive)			Health news (Negative)			Death (Positive)			Death (Negative)			Case (Positive)			Case (Negative)
Sector	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.
Basic materials	0.359	1.668	0.098***	−0.644	−3.626	0.000*	0.013	0.109	0.913	−0.12	−1.23	0.221	0.205	1.081	0.282	−0.382	−2.611	0.010*
Consumer goods	0.311	1.828	0.070***	−0.609	−4.332	0.000*	0.069	0.705	0.482	−0.161	−2.072	0.041**	0.164	1.077	0.284	−0.363	−3.09	0.003*
Consumer services	0.26	1.552	0.124	−0.642	−4.638	0.000*	0.119	1.234	0.22	−0.145	−1.878	0.063***	0.184	1.225	0.223	−0.353	−3.034	0.003*
Financials	0.226	0.933	0.353	−0.821	−4.108	0.000*	−0.07	−0.509	0.612	−0.17	−1.545	0.125	0.082	0.383	0.702	−0.522	−3.175	0.002*
Health care	0.353	2.145	0.034**	−0.55	−4.043	0.000*	0.094	0.996	0.322	−0.131	−1.742	0.084***	0.216	1.492	0.139	−0.37	−3.303	0.001*
Industrials	0.239	1.108	0.27	−0.706	−3.976	0.000*	−0.028	−0.232	0.817	−0.156	−1.606	0.111	0.135	0.713	0.477	−0.444	−3.04	0.003*
Oil and gas	0.29	0.896	0.373	−0.92	−3.442	0.001*	−0.073	−0.405	0.686	−0.21	−1.459	0.147	0.17	0.606	0.546	−0.643	−2.972	0.004*
Technology	0.437	2.139	0.035**	−0.703	−4.172	0.000*	0.123	1.05	0.296	−0.149	−1.594	0.114	0.253	1.386	0.169	−0.411	−2.922	0.004*
Telecommunications	0.186	1.17	0.244	−0.435	−3.194	0.001*	0.037	0.421	0.675	−0.138	−1.971	0.051***	0.05	0.36	0.719	−0.26	−2.423	0.017**
Utilities	0.407	1.869	0.064***	−0.689	−3.827	0.000*	−0.176	−1.786	0.077***	−0.002	−0.017	0.986	0.102	0.532	0.596	−0.46	−3.098	0.003*
All sectors	0.223	1.502	0.136	−0.578	−4.724	0.000*	0.043	0.506	0.614	−0.147	−2.16	0.033**	0.145	1.105	0.272	−0.381	−3.768	0.000*

Notes: *, ** and *** show significance at 1%, 5% and 10%, respectively.

Source: The Author.

Table 6. Predictability results of sectoral stock returns for Islamic stock markets.

	Equation (5)(5) $$r_{it=}\propto +{\beta }_1^{+}{\mathit{healthnews}}_{i,t-1}^{+}+{\beta }_2^{-}{\mathit{healthnews}}_{i,t-1}^{-}+{\epsilon }_{it}$$(5)						Equation (6)(6) $$r_{it=}\propto +{\beta }_1^{+}{\mathit{Covid}-19d\mathit{eath}}_{i,t-1}^{+}+{\beta }_2^{-}{\mathit{covid}-19d\mathit{eath}}_{i,t-1}^{-}+{\epsilon }_{it}$$(6)						Equation (7)(7) $$r_{it=}\propto +{\beta }_1^{+}{\mathit{Covid}-19c\mathit{ase}}_{i,t-1}^{+}+{\beta }_2^{-}{\mathit{Covid}-19c\mathit{ase}}_{i,t-1}^{-}+{\epsilon }_{it}$$(7)
	Health news (Positive)			Health news (Negative)			Death (Positive)			Death (Negative)			Case (Positive)			Case (Negative)
Sector	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.	Coef.	T Stat.	Prob.
Basic materials	0.282	1.9	0.060***	−0.44	−3.595	0.001*	0.081	0.971	0.334	−0.121	−1.819	0.072***	0.205	1.588	0.115	−0.298	−2.99	0.003*
Consumer goods	0.235	1.977	0.051***	−0.468	−4.766	0.000*	0.083	1.225	0.223	−0.134	−2.455	0.016**	0.151	1.423	0.158	−0.291	−3.552	0.001*
Consumer services	0.248	1.558	0.122	−0.679	−5.156	0.000*	0.048	0.51	0.611	−0.156	−2.091	0.039**	0.134	0.937	0.351	−0.42	−3.794	0.000*
Financials	0.286	1.423	0.158	−0.649	−3.908	0.000*	0.016	0.14	0.889	−0.143	−1.566	0.12	0.14	0.798	0.426	−0.444	−3.265	0.002*
Health care	0.309	2.536	0.013**	−0.434	−4.315	0.000*	0.097	1.394	0.166	−0.121	−2.17	0.032**	0.194	1.79	0.076***	−0.274	−3.272	0.001*
Industrials	0.178	1.144	0.255	−0.52	−4.09	0.000*	0.021	0.236	0.814	−0.138	−1.966	0.052***	0.145	1.072	0.286	−0.356	−3.401	0.001*
Oil and gas	0.288	1.049	0.296	−0.811	−3.583	0.001*	−0.069	−0.453	0.652	−0.188	−1.534	0.128	0.177	0.748	0.456	−0.583	−3.182	0.002*
Technology	0.382	2.183	0.031**	−0.627	−4.345	0.000*	0.115	1.138	0.258	−0.135	−1.674	0.097***	0.236	1.511	0.134	−0.376	−3.115	0.002*
Telecommunications	0.061	0.821	0.413	−0.235	−3.854	0.000*	0.017	0.427	0.67	−0.09	−2.771	0.007*	−0.004	−0.063	0.95	−0.17	−3.445	0.001*
Utilities	0.073	0.824	0.412	−0.249	−3.383	0.001*	0.058	1.206	0.23	−0.103	−2.687	0.008*	0.069	0.934	0.352	−0.246	−4.327	0.000*
All sectors	0.294	2.013	0.047**	−0.554	−4.602	0.000*	0.077	0.912	0.364	−0.135	−2.011	0.047**	0.187	1.44	0.153	−0.351	−3.501	0.001*

Notes: *, ** and *** Show the significance at 1%, 5% and 10%, respectively.

Source: The Author.

Table 7. C.T. statistic results of forecast evaluation for conventional stock markets.

	In sample			Out of sample
According to historical returns Sector name	Health news	COVID-19 deaths	COVID-19 case numbers	Health news	COVID-19 deaths	COVID-19 case numbers
Basic materials	0.065	0.007	0.034	0.138	0.020	0.092
Consumer goods	0.088	0.021	0.045	0.071	0.055	0.102
Consumer services	0.094	0.022	0.045	−0.064	−0.012	0.039
Financials	0.072	0.012	0.043	0.203	0.144	0.129
Health care	0.083	0.018	0.055	0.272	0.021	0.114
Industrials	0.070	0.012	0.042	0.202	0.081	0.101
Oil and gas	0.053	0.010	0.039	−0.012	0.016	−2.023
Technology	0.087	0.016	0.044	0.055	−0.001	0.026
Telecommunications	0.052	0.018	0.026	−0.028	0.081	0.066
Utilities	0.074	0.014	0.042	0.165	0.116	0.088
All sectors	0.096	0.022	0.064	0.336	0.118	0.165

Source: The Author.

Table 8. C.T. statistic results of forecast evaluation for İslamic stock markets.

	In sample			Out of sample
According to historical returns Sector name	Health news	COVID-19 deaths	COVID-19 case numbers	Health news	COVID-19 deaths	COVID-19 case numbers
Basic materials	0.068	0.019	0.048	0.268	0.014	0.122
Consumer goods	0.103	0.033	0.061	0.266	0.097	0.127
Consumer services	0.111	0.020	0.063	0.257	0.068	0.061
Financials	0.070	0.011	0.048	0.117	0.018	−0.027
Health care	0.098	0.029	0.058	0.246	0.034	0.077
Industrials	0.073	0.017	0.053	0.303	0.065	0.142
Oil and gas	0.058	0.012	0.045	0.018	0.020	0.060
Technology	0.093	0.018	0.050	0.069	0.016	0.016
Telecommunications	0.064	0.034	0.049	0.279	0.039	−0.022
Utilities	0.051	0.037	0.079	0.179	0.091	0.058
All sectors	0.098	0.021	0.059	0.233	0.048	0.084

Source: The Author.