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COVID-19 Infections and the performance of the stock market: an empirical analysis for Australia

Citation

Brueckner, M and Vespignani, J, COVID-19 Infections and the performance of the stock market: an empirical analysis for Australia, Economic Papers pp. 1-21. ISSN 0812-0439 (2021) [Refereed Article]

Copyright Statement

Copyright 2021 The Economic Society of Australia

DOI: doi:10.1111/1759-3441.12318

Abstract

Using daily data, we estimate a vector autoregression model to characterise the dynamic relationship between COVID-19 infections in Australia and the performance of the Australian stock market, specifically the ASX-200. Impulse response functions show that COVID-19 infections in Australia have a significant positive effect on the performance of the stock market: a one standard deviation increase in new registered cases of COVID-19 infections in Australia increases the daily growth rate of the ASX-200 by around half a percentage point. This result is robust to alternative lag selections of the VAR model as suggested by alternative information criteria, including in the model control variables for stock market volatility, that is the ASX-200 VIX; the USD-AUD exchange rate and the international oil price; news by the World Health Organization regarding a COVID-19 pandemic and public health emergency; and the government-imposed shutdown of parts of the Australian economy. We also present estimates of the dynamic relationship between the daily growth rate of the Dow Jones and daily new cases of COVID-19 infections in the United States. The US data show, similar to the Australian data, that there is a significant positive effect of COVID-19 infections on the performance of the stock market.

Item Details

Item Type:Refereed Article
Keywords:Australian stock market, COVID-19
Research Division:Economics
Research Group:Applied economics
Research Field:Financial economics
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Macroeconomics not elsewhere classified
UTAS Author:Vespignani, J (Associate Professor Joaquin Vespignani)
ID Code:144688
Year Published:2021
Web of Science® Times Cited:1
Deposited By:Economics and Finance
Deposited On:2021-06-04
Last Modified:2021-09-30
Downloads:0

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