COVID-19 and Stock Market Volatility

By Enrico Onali. Social Science Research Network, 2020

236 citations recorded by the source corpus.

I investigate the impact of COVID-19 cases and related deaths on the US stock market (Dow Jones and S&P500 indices), allowing for changes in trading volume and volatility expectations, as well as day-of-the-week effects. The results, based a GARCH(1,1) model and data from April 8, 2019 to April 9, 2020, suggest that changes in the number of cases and deaths in the US and six other countries majorly affected by the COVID-19 crisis do not have an impact on the US stock market returns, apart from the number of reported cases for China. However, there is evidence of a positive impact, for some countries, on the conditional heteroscedasticity of the Dow Jones and S&P500 returns. VAR models suggest that the number of reported deaths in Italy and France have a negative impact on stock market returns, and a positive impact on the VIX returns. Finally, Markov-Switching models suggest that at the end of February 2020 the magnitude of the negative impact of the VIX on stock market returns increased threefold.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f2e497be44b676b5a23577f9634534101deaf309

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Citations in the corpus

To what extent does COVID-19 drive stock market volatility? A comparison between the U.S. and China (2021, unknown): “Wavelet analysis has been widely used in the field of economics and finance (Su et al., 2019; 2020).”
Impact of COVID-19 pandemic on stock markets: Conventional vs. Islamic indices using wavelet-based multi-timescales analysis (2021, result): “…and Viratyosin, 2020; Ramelli and Wagner, 2020; Ozili and Arun, 2020; Mazur, Dang, and Vega, 2020, Hasan et al., 2021; Li, 2021; Yarovaya, Elsayed, and Hammoudeh, 2021; Uddin, Chowdhury, Anderson, and Chaudhuri, 2021; among others) with some exceptions that reported mixed results (Onali, 2020).”