COVID-19 and the Stock Markets: A Glance at the Initial Effects of the Pandemic
COVID-19 and the Stock Markets: A Glance at the Initial Effects of the Pandemic
Author(s): Petar SorićSubject(s): Supranational / Global Economy, Health and medicine and law, Economic development, Financial Markets
Published by: Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: COVID-19 pandemic; economic uncertainty; stringency index; stock market; panel VAR;
Summary/Abstract: The COVID-19 pandemic and consequent economic lockdown have triggered unprecedented economic uncertainty. The financial markets responded instantly, pricing in the uncertainty boom. This paper assesses the impact of anti-COVID social distancing measures on stock markets across the globe. Analyzing 60 world economies in a panel vector autoregression framework, we find that the stringency of social distancing interventions has a negative effect on market returns, but its character is strictly transitory and it fades away within 7 days. The magnitude of the pandemic in terms of recorded disease cases and deaths reveal a very similar pattern, causing a significant, but short-lived decline of stock prices. Our estimates reveal a considerable asymmetry in the identified interrelationships. Less developed markets seem to respond to the economic lockdown more intensively than highly developed economies.
Journal: Ekonomický časopis
- Issue Year: 69/2021
- Issue No: 05
- Page Range: 472-493
- Page Count: 22
- Language: English
