This study investigates the Casablanca Stock Exchange response to the COVID-19 by considering the impact of the COVID-19 related cases and deaths of eleven selected countries affected by the COVID-19, including Morocco, on the Moroccan Stock Market (MASI Index), over the period from June 13, 2019, to June 11, 2020. This study employs the GARCH (1,1) model for this purpose, in which we are allowing for the impact of changes in the COVID-19 related cases and deaths in both the conditional-mean and the conditional heteroscedasticity equations. Furthermore, we extend our analysis by employing the VAR-X model to examine stock market returns and trading volume response to the COVID-19 related cases and deaths. Finally, we use the Markov-Switching models to inspect whether the COVID-19 has caused a structural break in the stock market returns. Empirical results indicate that in some of the selected countries, changes in the number of cases and deaths related to the COVID-19 have had an impact on the volatility of the MASI Index as well as the MASI Index returns. Furthermore, the Markov-Switching model results suggest that at the end of February 2020, the COVID-19 pandemic crisis has caused a structural break on MASI Index returns and the relationship between trading volume and MASI index returns has turned negative.

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Keywords

COVID-19; Casablanca Stock Exchange; MASI index; GARCH model; VAR-X model; Markov-Switching model.