World equity markets and COVID-19: Immediate response and recovery prospects

Following the spread of the COVID-19 pandemic, most global equity market indices experienced significant falls. Recognizing the severe economic impacts of the pandemic, starting from mid-March, many governments announced unprecedented economic rescue packages, which appear to restore investors' confidence, given the recoveries recorded in most stock markets. However, the recovery performance significantly varies across countries. This paper provides an empirical analysis on what may explain this variation in the recovery performance observed in equity markets across countries. We find that among different types, fiscal stimulus supports seem to be strongly and positively associated with higher recovery that may justify more targeted fiscal supports for the real sector firms to restore investors' confidence. We also find that the severity of the outbreak, reliance more on natural resource and tourism revenues are negatively associated with countries' stock market recovery performance.